Small Businesses Losing Out on Interest from Big Banks

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RaboDirect Online Bank published a survey revealing that seven out of ten Irish SMEs are disillusioned with their business banking. RaboDirect have introduced an increased interest rate of 4.30% on instant access business savings accounts.

RaboDirect Increases Business Savings Rate

Business Savings - Most SMEs are earning less than 1% interest. Irish SMEs continue to be disillusioned with their business banking services with seven out of ten citing current account charges for overdrafts and lack of rewards for positive balances as key factors according to a survey of the sector from RaboDirect, the AAA rated online savings and investment bank.

RaboDirect published the survey as it announced an increase in its instant access business saver interest rate to 4.30%effective from 5th August. SME's can avail of even higher rates on term deposits starting from one month.

Independent research carried out on behalf of RaboDirect found that a significant number of SMEs are earning less than 1% interest on their surplus funds while only 22% have been offered specific business savings rates according to the RaboDirect survey.

The survey also found that just under half of all SMEs have surplus funds of which 3 in 10 have interest rate earnings of less than 1%. A high proportion of SMEs, 68%, have their current account in credit for 28-31 days every month with an average balance of €220,000.

Over half of those surveyed were in the service industry with the remainder being in manufacturing, construction and distribution. Six out of ten businesses employed less than ten people. The survey was carried out by Amarach Research on behalf of RaboDirect.

Commenting Greg McAweeney said "The main banks continue to dominate business banking with seven out of ten respondents indicating that their primary relationship is with them. Despite various measures to encourage transparency and competitiveness in business banking it seems as though SME's remain a soft touch for the mainstream banks when it comes to business deposits. Whether you are a self employed service provider in the professions or a small enterprise the chances are that you will have surplus funds languishing in an account on a paltry interest rate. With SME's now under greater pressure than ever moving their business deposits to RaboDirect is a quick and easy way of adding to the bottom line. The alternative is to have your cash inaccessibly tied up with banks that are already profiting substantially through overdraft and current account charges. This is particularly relevant at a time when the average waiting period for payment from creditors is 67 days".

Earlier this year RaboDirect, part of the Rabobank Group and Ireland's only AAA rated bank, entered the business savings market with the launch of its first ever Business Savings Account. This instant access account offers the same 4.0% AER rate of interest to all business customers regardless of size or deposit amount and is available to sole traders, partnerships, solicitors and private limited companies alike. As of August 5th 2008, RaboDirect will increase its instant access business saver interest rate to 4.3%.

As with all RaboDirect demand savings products, no minimum terms or deposits apply and there are no complicated rate structures that lack transparency. The account is not subject to bank charges, interest is calculated daily and there are no penalties or time delays for early withdrawals. RaboDirect.ie championed the introduction of competitive savings when it launched in Ireland in 2005 offering new levels of transparency, consistently high rates and security. The bank plans to inject fresh competition into the SME market where banks have been profiting from inertia and SMEs need to have easy access to savings.

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Martin O'Leary
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