Managing your Business's Cash Flow: Term Deposits

Welcome to part three of the summer series on managing cash flow for businesses.  Previous articles explored how an Operating Line of Credit and Business Credit Card can be useful in helping with your day-to-day cash flow.  This month, we’ll talk about why term deposits can be a helpful tool to manage cash flow.

What is a term deposit?

A term deposit is an investment that is held for a specified amount of time at a specified rate of interest.  It’s a low-risk investment and a safe way for a business to grow its cash.  Principal and interest payments are paid monthly, quarterly, semi-annually or at the end of the term.  We're flexible!  Terms can range from 30 days up to five years, and you can always roll your deposit into a new term.

What are the benefits?

As a safe, low-risk cash investment, term deposits offer a great savings strategy for businesses. Term deposits generate higher monthly interest than through a chequing or savings account.  Put simply, you'll make more money - for free - by choosing a term deposit.  Having your money invested will also give you time to consider how best that cash can be used in the future.  The CUA team can work with you to determine a flexible and customized term deposit solution for your needs. And with CUA's deposit insurance provider, you can rest assured knowing that your funds are safe and secure.

What's a term deposit "laddering" strategy? 

Depending on your unique financial situation, our team may recommend a deposit laddering strategy instead of having all of your funds locked into a single term.  By laddering your funds - having different amounts invested for different lengths of time - you'll be able to secure higher rates for the longer-length terms.  Laddering your deposits ensures you're making the most of your money.

Is a term deposit right for you?

If you have a surplus of cash sitting in an everyday account, a term deposit is an effective way to invest it. Ideally, you would be comfortable leaving it in the account for the duration of the term.  That said, CUA understands that life throws opportunities at us from time to time, which is why we'll work with you to ensure access when required. Term deposits are also an attractive option for business owners who may be nearing retirement or are thinking of selling their business.  

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