Neobroker Lightyear has launched business accounts in the UK.
It says the new business accounts will give British SMEs access to a treasury product traditionally reserved for large corporates, where they’ll earn 5.14% AER (variable) on their money.
It comes as the firm releases analysis on new Bank of England data highlighting the increase in the total amount of cash British businesses hold – nearly half a trillion pounds – but the near-to-nothing interest rate the majority of it gets.
It says that whilst SMEs account for 99% of all businesses in the UK, they rarely get access to accounts where they can put their money to work because these are traditionally reserved for larger corporates.
According to Lightyear’s analysis of Bank of England data, businesses hold more cash than credit; the total amount of money held in deposits by private businesses in the UK has been rising since 2008, which was when reporting started – with a spike since COVID – and is continuing to trend upwards. It overtook the amount lent to businesses in 2017. The recent release of May’s figures reveals that businesses now hold £562 billion in deposits, vs £449 billion in credit.
But, whilst businesses have over half a trillion pounds that could be put to work, £426 billion of it (76%) is sitting in savings or current accounts with an average interest rate of just 1.7%.
Martin Sokk, co-founder and CEO of Lightyear, said:
“There’s lots of talk around how banks don’t pass on high rates to consumers’ savings. But what about businesses’ savings? The narrative around SMEs is dominated by problems they face trying to get finance; people presume SMEs don’t have money to put to work. But, as our analysis proves, they certainly do. British businesses now have more cash than credit.
“What’s shocking is that nearly half a trillion pounds of it earns 1.7% interest. With the current economic situation, it’s incredibly important that businesses become smart about where they put their cash. But existing options for them to do this are practically non-existent.
“At Lightyear we’ve worked hard on making sure our retail customers can grow their wealth, so with today’s launch of our business accounts, I’m excited to do the same for SMEs. The market is certainly in need of a huge shake up.”
Andy Davis is the owner of small business The Investors Media Company LTD, where he writes about finance for various clients. He is one of the first beta users of Lightyear’s business accounts.
Andy said:
“I knew how valuable money market funds could be for my company because of my work as a freelance finance writer. But this is the root of the problem: you shouldn’t have to have a business in the finance industry to know about this. All small businesses should have access to straightforward business accounts that follow the Bank of England rate. But that option hasn’t existed until now.
“I previously used an account from my bank that put my cash into money market funds, but I had to give a month’s notice to withdraw and the rate I received was less than half the Bank of England’s base rate. That defeats the purpose. I need to earn as much interest as I can on my company’s money, but it also needs to be properly liquid so I have an easily accessible cushion for quiet periods to smooth out my cash flow. With the account that Lightyear offers, I get the same deal as big companies that have been using money market funds for decades. That’s a massive step forward for small businesses like mine.”
Lightyear will give businesses of all sizes access to their treasury product, without the traditional £1 million minimum investment criteria. There will be no minimum deposit or maximum deposit criteria for a business to use the platform.
