Bank CDs for Your Business Cash

Business certificates of deposit are more flexible than ever and offer higher rates

You're not on a shoestring anymore, and extra cash may be idling in your business checking account. Consider parking your cash in a bank certificate of deposit (CD), a time-based, fixed-income investment that can earn you extra income with no effort on your part.

Here are three things you need to know:

1. This is a great way to store your money at a higher interest rate than most money market accounts, but depending on the type of CD you choose, your cash may be locked up for a predetermined period of time.
2. You might pay a penalty for early withdrawal, so make sure you know what your bank will charge before you lock the money away.
3. Be clear when the CD matures. Don't confuse call features with maturity. A "one-year, non-callable" CD means the bank cannot redeem the CD in one year – but it does not mean the CD matures in one year.
4. Look for the new "liquid CDs" that many banks are offering. They park your money for a set period at a higher rate, but generally you can take money out any time you want or re-issue the CD if rates go up.

 

Shop for the best rates online

Interest rates are constantly changing, and so is the list of financial institutions offering the best CD deal of the moment.
Try: Compare CD rates quickly and easily at Bankrate.com. Use the calculator to compute earnings. Also compare rates at Money-rates.com and see what the big national banks serving small business, such as Bank of America, are offering.

Check out cyberspace investing

Many on-line banks offer higher interest rates than brick-and-mortar banks because their overhead is lower, and they can pass savings to you.
Try: Go to Ing Direct to open and fund a CD in less than five minutes online. There's no minimum, and you can start with a six-month CD. Other options: Emigrantdirect.com, Imperial Capital Banking and HSBC.

Customize your CD

These days, banks will often customize a CD to terms that match your small business needs. So if you're afraid to tie up cash for a year, choose a very short-term CD of one month.
Try: Check out Chase.com and ask for a one-month CD. 1st Mariner Bank offers a flexible CD that lets you bump up the rate once during the term and withdraw without penalty once.

Create a ladder of CDs

Depending on which way interest rates are headed, a CD ladder allows you to lessen your risk, increase your return and gives you access to some of your cash. Buy several CDs at once with different maturity dates, each representing a rung on a ladder.
Try: All of these can create a ladder for you: Countrywide Bank, United Bank, LaSalle Bank and Guaranty Bank.

 

• Brokered CDs are purchased from financial advisors and brokers who scan the world of CDs and present the best, but your cost will usually come from the annual percentage yield (APY) you earn.
• Non-profit credit unions often offer a higher rate than banks. Choose one insured by the National Credit Union Administration (NCUA), a federal agency.
• Snag a preferred customer rate by opening your CD where you do other banking – but be sure total assets don't exceed $100,000.

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