If your business has a lump sum of cash that you want to park in a short term investment option whether it's for your SMSF or your own business, business term deposits are available from a range of Australian banks and financial institutions.
When you’re considering your investment options, you’ll need to compare the following to find the best term deposit fit for your needs:
- Interest rates: The higher the rate, the more interest you’ll receive. Interest rates are usually linked to the investment term, so it’s a good idea to compare between investment terms as you might find that the rate for a 3 month deposit will be more than a 6 month one.
- Minimum investment amount: With some business term deposits you’ll need to have a higher investment amount than a personal term deposit. Some banks have a minimum $10K deposit while others will only have a minimum of $5,000.
- Bank: Don’t fall into the trap thinking that the big four banks (ANZ, CommBank, NAB and Westpac) are your only or safest investment option. All banks and financial providers that we list on Mozo are covered under the Australian Government Guarantee. This means that you are covered up to $250,000 per term deposit, per institution.
Traps to avoid with business term deposits
- Auto rollovers: Bank will notify you when the time is getting near to the end of the investment term and will often let you know of a rollover option. This means that your existing business term deposit will get rolled over to a new term. While there is nothing wrong with this, generally speaking it’s a good idea before accepting the auto rollover rate, that you do some quick term deposit rate shopping on Mozo to see what interest rates other banks are offering for the same amount and term.
- Early withdrawal penalties: Before your settle on an investment term, particularly if you are thinking of the longer term like 2 years, you’ll want to be pretty sure that you are not going to need (or want) that money sooner. Term deposits come with break fees which mean that if your business needs to take your money out sooner than the time that you’ve initially agreed, you are likely going to have to pay a fee.
- Low interest rates: Don’t settle for low interest rates on your term deposit just because you already have an account with a particular bank. Most term deposits these days can be opened online and challenger banks and credit unions often have more competitive rates. The higher your interest rate, the more money you’ll get back at the end of the term so be sure to shop around.