Do You Need a Business Savings Account? 7 Key Benefits

Creating a dedicated business savings account is a great way to start building funds for emergencies, taxes, and other business goals. Business savings accounts are Federal Deposit Insurance Corp. (FDIC)-insured to keep your money safe and offer higher interest rates to help grow your balances. Without a savings account to separate your savings from your working capital, you’ll risk mismanaging your business resources.

We look at seven business savings account benefits below.

1. You Can Prepare for Emergencies

Your business savings account is the best place to store funds for unexpected expenses. If you form the habit of depositing excess funds into your savings account, you can use this extra cushion to cover costly unanticipated events. Having these funds available saves you from having to take on debt. And since business savings accounts are liquid assets, you can easily access your funds when you need them, without cost.

2. You Can Save for Tax Payments

A business savings account gives you a place to set aside money for future taxes. Because business checking accounts are typically used for current business expenses, using a business checking account without a separate savings account may cause you to prioritize current expenses over future tax payments. Having a cash reserve designated for tax payments in a separate business savings account helps ensure you have sufficient money to pay the IRS when tax season comes.

3. You Can Save for Future Business Growth

When it comes to business, owners should think long term. Saving money in a separate business savings account allows you to prepare for future business projects and growth. It will be easier to fund a business expansion if you’ve built the habit of setting aside money for your goals. Funding growth without having to take out huge loans will help you save on interest costs and maximize your profits.

4. You Can Earn Interest on Your Deposits

Savings accounts tend to offer higher interest rates than checking accounts. If you choose accounts with competitive annual percentage yield (APY), the money you place inside your business savings account will generate profit instead of sitting idle. Many banks also reward larger savings balances with higher interest rates, allowing you to earn more by saving more. You can read our what is APY article for more information on earning interest.

5. You Can Protect Your Money With FDIC Insurance

Business savings accounts are typically protected under the FDIC for up to $250,000, which guarantees that you will get your funds back in case your bank fails. FDIC insurance makes savings accounts safer than other interest-bearing options, such as investment accounts. For a more detailed breakdown of how FDIC insurance works, refer to our article on FDIC insurance for business accounts.

6. You Can Use It for Overdraft Protection

Another benefit of having a separate business savings account is that you can set it up for overdraft protection if you maintain your business checking account in the same bank. With overdraft protection set up, your bank will automatically transfer funds from your savings account to cover expenses your checking account cannot cover, helping you prevent overdraft or returned item fees.

Read our article on overdraft protection for more information on how it works.

7. Your Business Can Be More Creditworthy

Having a business savings account can help make your business more creditworthy, especially in the eyes of lenders. Lenders will often want to see your bank statements when you apply for business loans or lines of credit. Having funds in your savings account shows that you have funds available and are capable of repaying loans.

Risks of Not Opening a Business Savings Account

• Commingling business and personal finances: A business savings account safely stores your company savings in a designated business bank account, so you don’t have to use your personal savings account to save extra business funds.
• Being unprepared for emergencies: Without an emergency fund, your business will be vulnerable and less prepared for unforeseen events, which often come with unanticipated business expenses.
• Incurring more financing costs: You may be forced to finance expenses, especially unexpected ones, if you don’t have a business savings account as a backup.
• Being denied business loans and credit: When applying for lending services, having bank statements from business savings accounts gives your lenders more confidence that you can pay off your debts. You’ll find it more difficult to be deemed creditworthy without a business savings account.
• Missing the opportunity to grow your extra business money: Savings accounts allow you to earn interest on your deposits. If you keep your business funds in a non-interest-bearing checking account, you’ll miss out on the opportunity to grow your money passively.

Best Business Savings Accounts

Building your business savings account generally gives your company an advantage. If you find these benefits appealing and decide to open a business savings account, find one that offers the best APY at the lowest cost. Our guide to the best savings accounts for your business lists excellent products based on several factors, including APY, fees, balance requirements, and other account features. Here are a few you can consider:

1. Live Oak Bank is the best overall savings account with the highest APY. Its savings account earns interest at a rate of 3.70%, which is eight times larger than the national average. Read our Live Oak Bank business savings review for more account details.
2. Prime Alliance Bank is best for tiered APY. Its business savings account earns tiered interest, letting you earn larger profits on bigger balances.
3. Mercury Mercury is a fintech company, not an FDIC-insured bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust ®️; Members FDIC. Deposit insurance covers the failure of an insured bank. is the best for businesses with balances over $500,000. In our breakdown of the best checking accounts for small businesses, we named Mercury the best provider for tech companies and startups. It supports high-growth companies by offering a treasury account Mercury Treasury, by Mercury Advisory, LLC, an SEC-registered investment advisor. Registration with the SEC does not imply a certain level of skill or training. SEC registration does not mean the SEC has approved of the services of the investment adviser. that earns up to 4.88% annually. However, you need a balance of $500,000 or more to qualify for this product. Refer to our Mercury business checking review for more information.

Bottom Line

Business savings accounts earn interest and protect profits, helping your business save extra funds for future use. By opening a business savings account and building the habit of making consistent deposits, you can create a backup to sustain your business during lean times and help pay for unplanned expenses.