Business Term Deposits

Find out how a business term deposit can offer a high rate of return in a low-risk environment and compare your options with Savvy.

Last updated on July 4th, 2022 at 04:40 pm by Cate Cook

Compare business term deposits

Term deposits offer a convenient and risk-free way to earn high interest on your business’ savings.  However, the interest rates on offer vary widely between providers, so it’s well worth comparing business term deposits to make sure you really are getting the best deal. 

You can do this right here with Savvy.  We help you compare a range of offers in detail and decide which deal is best for your business’ savings.  Start comparing your options with Savvy today.

site-logos Citi Term Deposit
  Maximum Rate Interest Rate Minimum Deposit Government Guarantee  
site-logos 2.25%
1 Year
1.00% $10,000 Yes
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$0 Set up and no ongoing account-keeping fees. Interest rate depends on balance amount. Optional 3,6,9 or 12 month terms. Balances from $10,000.

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More about business term deposits

How do business term deposits work?

A term deposit works by paying a pre-determined fixed interest rate in return for depositing a set sum of money for a limited period.  Financial institutions offer different interest rates according to the length of time you’re prepared to deposit your funds.  During the term of the deposit, those funds are locked away and you’re not able to access them.

While most financial institutions offer term deposits to standard customers, not all offer them to businesses (or offer term deposits to self-managed super funds). All institutions advertise their interest rates according to set terms, or lengths of time, ranging from one month to five years or more.  The interest on offer is expressed as a percentage per annum and varies widely. 

Business and SMSF deposits tend to have a slightly lower interest rate than retail interest rates, as they’re often designed for larger deposits, and usually have higher minimum balance requirements of up to $10,000 to $25,000 in some cases.

Savvy can quickly help you make these comparisons so you can work out which term deposit provider is the best one for your business needs.

Which features should I use to compare business term deposits?

These are the features to look at when comparing different term deposits for your business:

  • Interest rate – higher interest rates will lead to greater overall growth. For example, a 2% p.a. interest rate on a deposit of $15,000 will earn $612 in interest over two years, whereas the same deposit with a 3.5% p.a. interest rate will earn $1,086.
  • Term – decide exactly how long you wish to lock your funds up for, as not all institutions offer all terms.
  • Interest payments – interest can be paid monthly, quarterly, half-yearly, annually or at maturity, depending on the length of your term. Some banks offer a slightly higher interest rate if interest is paid less often, so it’s important to compare and find which best suits you.  Use Savvy’s term deposit calculator to work out which option is best for your business savings.
  • Deposit requirements – make sure you’re comfortable with the minimum and maximum deposit requirements. As mentioned, the minimum deposit may be higher than what you can manage to receive the advertised interest rate. Additionally, maximum term deposits can range from $250,000 up to $5 million in some cases, so it’s important to find an institution which can accommodate the deposit size you’re after. 
  • Early exit penalties – check what penalty fees are charged if a request is made to withdraw funds early. Hefty penalties can be applied, including a set early exit fee which is often over $50, plus loss of interest, which can see you lose up to 90% of the interest you would otherwise have earned if you choose to withdraw early on in the term.
  • Withdrawal notice – some institutions require a period of prior notice to withdraw funds. This can range from 14 days up to 30 days or more, so check and compare periods of notice if there’s any chance you may need to access your funds quickly.
  • Special offers – it’s always worth keeping an eye out for ‘specials’ that banks and financial institutes occasionally offer to attract new customers.  For instance, a bank may offer a particularly high interest rate for a two-year term deposit over $5,000.  These special rates are designed to be highly competitive to snag new business, and will usually be far higher than the interest offered on many savings accounts.

Is it better to open a business term deposit or savings account?

Both business term deposits and savings accounts have their pros and cons, and both options offer a secure place to park your savings.

The advantages of a term deposit include:

  • forced savings – no access is permitted to the funds, making it a suitable place to store business funds you don’t need to spend
  • higher interest rate – in general terms, term deposits will offer you a higher rate of interest than most savings accounts
  • guaranteed ‘set and forget’ investment – no further action is required to monitor your savings, and the interest you’ll earn can be calculated in advance which can help with annual business budgeting

The advantages of a high-interest savings account are:

  • you can keep adding to your business’ funds as revenue is earned, generating more interest on them along the way
  • you have immediate access to your funds in case an unexpected investment opportunity arises or if you need to cover expenses such as repairs or renovations
  • you can pay bills and buy goods and services directly from a linked savings account if you suddenly find yourself short of operating capital

Disadvantages of term deposits include:

  • strict minimum deposit conditions which may not suit smaller businesses with less in savings to stash away
  • difficulty and delay in accessing your funds in an emergency
  • there are likely to be penalties imposed if you do need to exit the agreement early

Disadvantages of savings accounts include:

  • lower interest rates offered, resulting in less growth in your business’ account overall
  • variable interest rates are offered, meaning your business won’t be able to budget as accurately around future interest earnings
  • if your business has a long-term financial goal to meet, this account doesn’t protect the funds completely from being spent

Your questions about business term deposits answered

What are loyalty bonuses for business term deposits?

Some banks and financial institutions offer ‘loyalty bonuses’ (often 0.05% p.a. or more) if you roll your funds over for a second term deposit.  If you wish to keep your business’ savings locked away, such offers can give its funds a handy boost.

Where can I find the best interest rate for my business term deposit?

In general terms, smaller and online-only banks, building societies and credit unions often offer the highest rates on term deposits. These financial institutions tend to have fewer overheads or operate on a not-for-profit basis, so they tend to offer higher interest rates than the big banks do.  However, the most important thing is to compare as many options as possible, which you can do with Savvy.

When should I stick to a short business term deposit?

Long term deposits can offer interest rate security in a period of falling interest rates, but short term deposits may be best when interest rates are rising, particularly if they’re rising quickly.  A short term deposit will also allow you to re-negotiate your interest rate more frequently and switch to a term with a higher interest rate several times a year if necessary.

What happens at the end of a business term deposit?

Your financial institution will contact you asking for instructions about what to do with your funds at the end of the deposit term.  Your options include:

  • rolling them over into another business term deposit
  • have them sent to your business transaction account so you can use them
  • have them deposited into another savings account

It’s vital to keep your financial institution up-to-date with your latest addresses and contact details.  If they can’t contact you at the end of the term or you don’t respond to them, your funds could end up in the government’s accounts for lost monies and it’ll take you time and effort to retrieve them.