Business term deposit rates

Business term deposits provide fixed interest rates and the security of guaranteed returns. If you're looking for a safe place to invest some of your business funds, here are the current business term deposit rates on offer.

*Best definition: Note there is no one rate that is best, and what is best for you may not be best for someone else. You should consider a range of factors when determining which business term deposit is right for you.

What is a business term deposit?

A term deposit is a type of bank account that allows you to earn a fixed rate of interest on your money for a set period of time. For example, you might invest $10,000 to earn interest at a rate of 1.50% p.a. for a period of 12 months. Once 1 year has passed, you will have access to your initial deposit again plus the interest earned.

While you can open a term deposit to grow your personal savings, a business term deposit is designed to help boost your business savings. Providing the security of a fixed interest rate and guaranteed returns, they offer a safe and risk-free way to improve your financial position.

Business term deposit versus business savings account

Whether you opt for a business term deposit or business savings account will depend on how hands-on you want to be, and how much access you want to the account. A term deposit is locked away for the life of the term (you can choose a length between 1 month and 5 years) and there are no ongoing deposit requirements to meet during this time. A business savings account isn't locked, so you can access the money at short notice whenever you need. However, it's not always a set-and-forget option like a term deposit, as savings accounts often have monthly conditions to meet.

Why should I open a business term deposit?

Every business owner is aware that there are always parts of any business that could do with a little extra money, so what are the advantages of putting your savings in a business term deposit instead of investing elsewhere? There are many:

Consistent returns

When you put money in a term deposit, you know what you are getting upfront. A fixed interest rate and a set investment period means you know exactly how much interest your term deposit will earn and can therefore include that amount in future financial calculations.

Your money is guaranteed

Savings balances of up to $250,000 are guaranteed by the Australian government, so there is virtually no risk of losing your money.

Boost your business savings

Business term deposits offer a simple way to make your money work harder for you, allowing you to safely improve the overall financial standing of your business.

High interest rate

Term deposits offer a higher interest rate than many other types of bank accounts, including many online savings accounts. And because the interest rate is fixed, you’ll be protected against any interest rate drops that may occur.

How to find the best business term deposit rates

In order to maximise the savings for your business, it’s important to shop around and find the best business term deposit rates. However, there are several factors that can impact the interest rate on offer on different term deposit accounts, including:

The term

The interest rate that applies to term deposits varies depending on the investment term you choose, with terms ranging from 30 days up to 5 years. Usually you'll find a higher rate on a longer term.

The amount you deposit

Different interest rates also apply based on the amount you invest. For example, your bank may offer higher interest rates if you deposit an amount greater than $25,000, as opposed to if you park a smaller sum of maybe $5,000 in a term deposit.

Bonus interest

To encourage you to remain a loyal customer, when a term deposit matures, some banks may offer you a “loyalty bonus” in the form of a bonus interest rate if you rollover your funds into a new term deposit.

The bank you choose

Just like with home loans and savings accounts, the specific interest rates on offer vary depending on the bank, building society or credit union you choose.

Taking all these factors into account, it’s clear that the most effective way to find the best business term deposit rates is to compare a range of options. This will help you find the highest interest rate for your desired investment amount and term.

Example: Finding the best interest rate

Don’t think it’s all that important to shop around for the best interest rate? Let’s take a look at the example of Kevin, who has $50,000 to invest to provide a future financial windfall for his business. As he is not expecting any major expenses to arise or any cashflow problems to develop any time soon, Kevin decides to compare a range of 5-year business term deposit rates at Finder.

While his current bank is offering an interest rate of 2.65% p.a., Kevin finds another financial institution offering fixed interest of 3.30% p.a. Both accounts pay interest annually. He calculates the difference in interest-earning power between the 2 accounts to see how much the change in interest rate could boost his bottom line.

As the table below shows, by choosing the higher interest rate of Account 2, Kevin can earn an extra $1,827.22 in interest over 5 years.

* This is a fictional, but realistic, example.

Other factors to consider when choosing a business term deposit

While the interest rate is a crucial factor when choosing a business term deposit, you should also remember to look at a range of other features, including:

Minimum deposit amount

Check to see what the minimum amount is that you can deposit into the account, for example $10,000. Also remember to check whether any maximum limit applies.

How often interest is paid

Read the fine print to find out when the interest on your term deposit is compounded. Accounts that compound interest monthly, for example, provide greater interest-earning power than accounts that compound annually.

Fees

Although many term deposits do not charge any fees, it’s worth making sure there are no set-up or account-keeping fees attached.

Loyalty bonus

Some banks will provide a loyalty bonus, in the form of an increased interest rate, if you elect to roll over your matured term deposit into a new term deposit account with the same institution. This can provide a further boost to your earning power.

Foreign currency options

If your business operates internationally and you regularly deal in more than 1 currency, it may be worth checking whether your bank offers the option of holding term deposits in foreign currencies.

Are there any disadvantages of business term deposits?

The major disadvantage of investing money in a business term deposit is that the funds are locked away until the deposit matures. While you may be able to access your money before the term ends, you can wave goodbye to any interest you stood to earn and could also have to pay a sizeable fee. With this in mind, if you experience a cashflow problem or if a once-in-a-lifetime business opportunity arises and you need urgent funds, having your money tied up in a term deposit could cause problems.

The other main disadvantage to be aware of is what happens to your money when the deposit matures. In many cases it will simply roll over into a new term deposit, which may not offer the most competitive rate, so it’s important to compare your options and check whether there are any other business term deposits with better interest rates available. It could be worth marking your calendar to keep note of the roll over date, so you can do a quick comparison to lock in the best rate.

Finally, remember that while a business term deposit offers protection against falling interest rates, it also means that you won’t be able to take advantage of any rate rises that occur. Instead, you’ll have to wait for the funds to mature before you can invest your money at a higher rate.

Justine Mclean is a business finance expert, author, speaker, financial educator and host of the Secrets of Successful Business podcast. With 30 years of experience in small business, Justine is on a mission to help business owners increase their financial literacy, build solid financial foundations and create profitable and sustainable businesses.

Justine released her book Become A Business Money Magnet - Simple habits to manage your money and supercharge your profits in 2024; she is a registered BAS Agent, Ladies Finance Club Ambassador, and named one of Coach Foundation's Top Female Business Coaches for 2022.

Frequently Asked Questions

• Can a business have a term deposit?

  Yes, businesses can open term deposit accounts to earn interest on their money. These accounts offer fixed interest rates for a specified term but it's important to note you can't access your money until maturity, without penalties or fees being applied.

• Which bank has the best business rates?

  The best business term deposit rates vary depending on the term length and amount deposited. Currently, Judo Bank, AMP and Bank Australia all offer competitive rates for 6 or 12 month business term deposits.

• Does AMP do business term deposits?

  Yes, AMP offers business term deposits across a range of terms with quite competitive interest rates.

• What is a corporate term deposit?

  A corporate term deposit is a fixed-term account offered specifically for corporations looking to earn interest on funds they aren't currently deploying for other business purposes.

• What is a business fixed term deposit?

  A business fixed term deposit is just another way of saying a business term deposit. Your business deposits funds for a set period or term and the money earns interest at a fixed interest rate. This rate doesn't change during the agreed term.

To make sure you get accurate and helpful information, this guide has been edited by Richard Whitten and reviewed by Justine Mclean, a member of Finder's Editorial Review Board.

Written by

Sarah Megginson

Head of editorial

As an authority on all things personal finance, Sarah Megginson is passionate about helping you save money and make money. She is an editor and money expert with 20 years’ experience and an extensive background in property and finance journalism. Sarah holds ASIC RG146-compliant Tier 1 Generic Knowledge certification, and she's a regular media commentator, appearing weekly on TV (Sunrise, Channel 7 news, Nine news), radio (KIIS FM, Triple M, 3AW, 2GB, 6PR) and in digital and print media. See full bio

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