Do You Need a Business Savings Account for Your Small Business?

Hopefully your small business has some extra cash reserves -- but you don't have to leave that money sitting in your business checking account. The best business savings accounts can help your company's cash earn interest.

High-yield savings accounts for personal savings tend to offer higher APYs than business savings accounts. But there are still a few good options for your business cash reserves. Make that money work harder for your company!

Let's look at a few of the best business savings accounts to consider.

Why you need a business savings account

If you own a limited liability company (LLC) or other legal business entity that qualifies for its own tax identification number (Employer ID Number), you can get a business bank account and business credit card. This can help you establish a separate legal and financial identity for your business that is separate from your personal finances. Over time, this can help you build business credit.

Most small business owners need a business checking account to receive income from clients and sales, and to manage everyday business expenses. Business savings accounts can also give you an easy place to hold your business's cash reserves, save money for taxes, and other specific business financial goals. Here are a few good reasons to open a business savings account.

You need to save money for taxes

Tax planning is a big part of life as a business owner. Using a business savings account can give you an easy way to park some cash each month to pay quarterly tax bills, and it keeps that money from getting lost in the flow of your everyday business checking account.

You're saving up for a big investment

Small business loans are not always easy to get. It can help to save up some cash for a big investment in your business, like new equipment or office supplies. Opening a business savings account can give you an interest-bearing account to help your business's money grow in the short term while you get ready to go after your next big expansion or growth opportunity.

You like to have cash on hand

Bill Gates was one of the most successful CEOs in history, but he was conservative about cash. Even after Microsoft had become one of the world's most profitable companies, Bill Gates always wanted to have 12 months' worth of cash on hand, in case the company had no money coming in for a year, and couldn't make payroll. Having extra cash in the bank can bring peace of mind to any business owner.

Earn interest on your business's extra cash

Your business might not have (or need, or want) 12 months' worth of emergency cash, but whatever amount you have deserves to earn interest. But many business savings accounts don't pay high interest. For example, some major national banks' business savings accounts are only paying 0.01%-0.25% APY, as of March 31, 2024. Fortunately, the best business savings accounts can give you a higher yield on your business cash.

Best business savings accounts (as of March 31, 2024)

Here are a few of the best business savings accounts we've found -- all APYs shown here were listed on the bank websites as of March 31, 2024.

Live Oak Bank Business Savings Account (4% APY)

Live Oak Bank offers 4% APY for business savings accounts, with no minimum deposits and no account maintenance fees. Live Oak Bank is FDIC insured and was founded in 2008; it's a digitally-focused bank that also provides SBA loans and USDA loans for small businesses.

First Internet Bank (3.46%-5.48% APY)

First Internet Bank (member FDIC) offers a Business Money Market Savings account with a 3.46% APY for daily balances of $5 million and below. (The higher 5.48% APY is only for businesses with daily balances of more than $5 million.)

This bank requires a minimum opening deposit of $100 and charges a $5 monthly fee; you can avoid this fee by maintaining an average daily balance of $4,000.

nbkc Bank (2.75% APY)

Nbkc Bank offers a Business Money Market Savings Account with 2.75% APY, with no minimum balance, and no fees. This APY is lower than the other banks on this list, but it could be a good choice if:

• You want a flexible business savings account option with no minimum daily balance and no fees
• You prefer to work with a bank that has branch locations

Lili Savings Account (4.15% APY)

Lili (lili.co) is a fintech app for small businesses that partners with Choice Financial Group (member FDIC) to provide banking services. Lili offers a business savings account, the Lili Savings Account, with 4.15% APY -- however, you must sign up for a qualifying tier of Lili membership to get this rate.

The monthly Lili account fees (starting at $9 per month) might cancel out the benefits of the higher APY. Also, this APY is only available for balances up to and including $100,000 -- balances over $100,000 will not earn interest.

Bottom line

Many small business owners are constantly reinvesting their cash back into the business. But having some extra cash reserves is always a good idea, whether you're a small business owner or the CEO of Microsoft. Choosing a good business savings account or money market account can help your business's extra cash earn interest. Don't leave that money on the table; get your cash reserves out of a zero-interest checking account and start earning some yield.