How Does a Certificate of Deposit Work for a Business Savings Strategy?
How a Non-Profit Benefited from a Business Certificate of Deposit
A small local non-profit organization was searching for a secure way to build their funds. While donations had been enough for them to meet operating goals, they wanted to invest their money in a way to ensure that their financial strategy created growth at the end of the year.
After researching potential options, the non-profit contacted their bank to ask exactly how does a certificate of deposit work for a business savings goal? They learned that a business CD strategy allowed them to achieve growth and set a timeline for accumulating additional funds.
By opening a 12-month business certificate of deposit they earned a higher APY compared to their previous basic savings account. At the end of the term they had managed to increase their savings and build a financial foundation that allowed them to confidently plan their community operations moving forward.
So, How Does a Certificate of Deposit Work?
When opening a CD, the account holder agrees to deposit an amount of money for a predetermined term length, usually ranging from 6 months to 5 years. In exchange, the financial institution provides a fixed annual percentage yield (APY) that will be paid out as interest on the CD over its lifetime.
CDs generally cannot have money withdrawn without paying an early withdrawal penalty. At maturity, the CD owner can withdraw the money plus earned interest or renew the CD at current rates.
Understanding and answering the question “how does a certificate of deposit work” is key to using it effectively as part of your financial plan. When considering a business cd, be clear on details like term length, compounding frequency, and renewal policies.
Using a Business CD Rate to Plan for Savings
As a small non-profit or business owner, understanding business cd rates allows you to maximize the growth of your funds. Using the projection of the APY gained from a business CD rate provides a useful metrics for planning investment and future spending options.
Working with the calculated interest earned from a business cd rate allows small businesses to more accurately budget for future costs, like an increase in employee income or charitable projects. By locking in a competitive interest rate, you can have more confidence the money for necessary upgrades will be there.
Making the Most of Your Business CD
The first step in making the most out of your planning is outlining the savings priorities for your business CD. Knowing where your company stands currently, and detailing future plans gives you a timeline to set for different savings goals. This understanding will help layout what business CD terms work for your strategy and goal.
Business CD and Savings Goals: How Does a Certificate of Deposit Work for You?
The best method for determining how a certificate of deposit works for you is to examine which business CD rate and terms match your business savings goals. The interest your business CDs earn will boost your reserves even more. Revisit your savings plan each year – over time you may decide to open more CDs to stay on track as your business changes.
With good planning, you can save for purchases and expenses that fuel the growth of your business.
For more information on the benefits of business banking, learn more here.
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