<img src="https://events.xg4ken.com/pixel/v2?tid=KT-N2BAB-3ED&amp;noscript=1" width="1" height="1" style="display:none">
  • There are no suggestions because the search field is empty.

What you Absolutely Must Know About CDs for Businesses

Chris Gottschalk

Chris Gottschalk About The Author

Nov 14, 2023 4:45:00 AM

It’s taken a while, but you’ve finally gotten your small business up and running. You’re no longer concerned about having enough money at the end of the week. In fact, you’ve even got enough money in your business savings account that you now have several different types of savings accounts you can open.

The big question is what account do you use? You have several options, including business money market accounts and even investment funds. However, one of the best options might just be a business certificate of deposit.

Here's what you need to know about CDs for Businesses

CDs for business accounts

What is a Certificate of Deposit?

In order to understand the benefits that a certificate of deposit can offer businesses, you have to understand what a CD is. When you open a CD account, you deposit money in it for a set period of time, ranging from a few months to a few years. In return, you get a higher interest rate, and once the CD matures, you get your initial deposit, plus the money you earned in interest.

Can I withdraw the money in Business CDs early?

You can access the money in a CD before the end of its term. However, there will be an early withdrawal penalty if the money is taken out before the maturity date.

How are CDs for Businesses Different than regular CDs?

Believe it or not, there’s very little difference between a CD for business accounts and regular CDs. Having said that, some financial institutions might have a higher minimum deposit requirement for business CDs than personal CDs. In return, though, the business CD rates will be higher.

Get a business account at First Alliance Credit Union 

Apply Today

What are the Benefits of Opening CDs for Business Accounts?

CDs for businesses have almost the same benefits for companies as they do for individuals. They are a great way to save money you’re not planning to use in the near future, since you’ll get a higher interest rate than you would if you kept your money in a traditional business savings account.

While you wouldn’t think that not being able to access your money until the CD matures qualifies as a benefit, the reality is that keeping your money locked away for a certain period of time does have some advantages. You won’t be tempted to spend your company’s money on an impulse buy, for instance, and you can use the time your money is in the CD to figure out just how you want to use it.

There’s one other benefit that many people overlook—the fixed rate of interest. This stable rate of interest gives you a guaranteed rate of return, so you know how much money you’ll get back when your CD matures. This can make planning what to do with that money a lot easier.

Finally, a certificate of deposit is just safe. If you open a certificate of deposit for a business account at a credit union, it is insured up to $250,000 by the National Credit Union Association (NCUA). (If you open a business CD at a bank, your money is insured by the FDIC.) That’s a level of protection you won’t get from other investments like mutual funds or individual stocks.

Benefits of a business CD

How do CDs Compare to Other Business Savings Accounts?

Of course, CDs for businesses aren't the only way for a company to store funds. Businesses have several options when it comes to saving money, including:

  • Business savings account
  • Business money market account
  • A big safe

Business savings account        

A business savings account might not have the interest rate as high as a certificate of deposit for business accounts, but it also doesn’t have a high minimum deposit requirement. It also gives you a lot more access to your business’s money, such as making deposits from your business checking account.

Business money market account

A business money market account gives you more access to your money than you would with a business certificate of deposit. However, a business money market account also has a higher minimum deposit requirement, and its interest rate isn’t as good as some longer term CDs.

A big safe

While a big safe is a popular option in movies everywhere, you’ll get a lot more advantages when you store your money in a bank account at a financial institution. That way, your money will earn interest, you’ll have an easier time tracking your expenses, and any thieves trying to open up the safe with dynamite will be disappointed when they see there’s nothing inside.

when to open a business CD

When to Use a CD for Business Accounts

Now that you know the benefits of a certificate of deposit for businesses and how they compare to other types of savings accounts for companies, only one question remains: when do you open a business CD? Some scenarios include:

  • When you have financial reserves that you can leave untouched for several months or years. If you have extra money that you’re not using, put it in a certificate of deposit to earn some extra interest.
  • When you need a stable investment. CDs for businesses and individuals are one of the most stable investments, and if you’re having trouble finding a risk-free investment, consider opening up a certificate of deposit.
  • When you are saving for a financial goal. CDs are a great way to save money for a financial goal. Even better, you can use several CD strategies to help you maximize your savings. For instance, you can use the CD bullet strategy to open multiple CDs all of which mature at around the same time.

Got questions about CDs or business accounts? Ask us! 

Get Started

Get Certificates of Deposit for Your Business at First Alliance Credit Union

When you open up a CD for businesses, you get a lot of advantages Not only do you get a better interest rate than you would in a traditional business savings account, but you also get time to figure out what to do with the money you’ve saved. You’ll also know exactly how much money you’ll be getting once the CD matures, thanks to the fixed interest rate.

If you’re interested in finding out how a CD for businesses can help your company, talk with our business lending team today. They’ll not only be able to help you figure out if a CD is the best place to keep the extra funds from your business, they’ll also help you understand what other business savings option exist. They can even help guide you through the process of opening a certificate of deposit.

We do our best to provide helpful information but we cannot guarantee the accuracy or completeness of the information presented in the article, under no circumstance does the information provided constitute legal advice. You are responsible for independently verifying the information if you intend to use it in any way. Additionally, the content is not intended to be reflective of First Alliance Credit Union’s products or services, for accurate and complete details about our product and service information you must speak to an advisor at First Alliance Credit Union.