Can a Business Own a CD Account?

A CD or a Certificate of Deposit is one of the common terms in the business and investment world. It’s a great financial investment and offers a lot of benefits. Learning new things about the financial aspects of running a company can be quite intimidating for new entrepreneurs, but it’s extremely necessary to make the most out of all opportunities provided to you.

If you’re getting into or are already running a business, you need to learn about what a CD account is and how it can benefit your company. But before that, let’s learn the exact definition of a certificate of deposit and how it works.

What Exactly is a CD Account?

A CD account is an agreement between the bank and you, the business owner, to leave a specified lump-sum deposit for a certain period of time, while you benefit from its interest rate premium.  Every bank has different terms when it comes to offering CD benefits, which includes the interest rate and penalties. A business can certainly own a CD account, but based on a few terms. Certain insightful tips at can help you learn a few things about a CD account before getting into it. 

Almost every bank and brokerage firm provides CD agreements, that can provide numerous benefits in the long run. Let’s take a look at a few.

Benefits of Getting a CD Account

1. It can Help Expand Your Business

Once you have your business up and running, there might come a point where you’d like to expand your business. You’ll definitely need some financial help at this point. A CD can help you after a few years by fetching a great interest rate on the amount you’ve initially deposited. Once you’ve earned some profit, we’d advise you to open a CD account and invest the money to gain an even bigger profit for future use. For instance, you’ve earned $100,000 through your business until now, which can fetch $102,000 in around three years, assuming that the interest rate is fixed at 2%. It’s a great deal of money to expand your business or to buy new equipment.

2. It Provides a Higher Interest Rate

Now, you might think – how is a CD account different from a savings account? While a savings account also provides a high earning potential, it is usually lower than a CD account. The highest rate of the CD is usually around 2.20%, while a savings account provides only around 1.80%. This means that the money earned through a savings account at the end of five or ten years will be a lot less when compared to the earnings from a CD. However, it’s only beneficial when you’re sure that you won’t need that huge amount of money in the coming years. You can also consider opening a CD account in more than one financial institution. A lot of business owners have more than one CD account, generally in a bank or institution that pays a high-interest rate.

3. It’s a Safer Option

CDs are the safest option for small businesses as they don’t play on high risks, such as stocks. It’s a fixed, guaranteed way of keeping your money secure while earning from it. Even if interest rates decrease, it wouldn’t really matter to the business owners with a CD account. Also, the Federal Deposit Insurance Corporation provides insurance for the accounts that bear up to $250,000, making the chances of risk almost zero. Because you have to pay penalty fees for withdrawing your money sooner than the locking period, business owners and new entrepreneurs are particularly careful about assessing the financial situation beforehand and investing money in a CD account thereafter.

4. The Procedure is Hassle-free

One of the reasons that small business owners prefer investing in CDs is because the process of opening an account is simple and absolutely hassle-free. Also, you don’t need a major amount to open a CD account. Most of the financial institutions accept a deposit of $1000, to begin with, and also $500 in a few cases. This is highly beneficial for business owners that have just entered the market. You just need a few documents and your CD account is open and operating. You can also decide the time period, ranging from 3 months to 5 years, depending on the institution.

Opening a CD account for a business is one of the smartest moves by business owners. It gives you financial freedom after a few years as you don’t have to worry about losing that chunk of money. It can even help you during retirement if you follow the ‘laddering’ scheme.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.