Shares: Put surplus cash to work for your business

Oct 02, 2020

A stock market portfolio can create capital growth and dividend payments at a yield higher than bank deposits. Wealth management specialist Tony Byrne explains.

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DO YOU run a successful business? Do you have a lot of surplus cash in your business account earning little, if any, interest? Are you interested in making your money sweat? If so, read on.

In previous articles I have written about the benefits of our cash management service for businesses and company pension schemes, especially Small Self Administered Schemes which are ideal for owner managed small and medium-sized businesses.

An alternative approach is to invest in shares. This can be done either by investing directly into individual shares via a stockbroker or into funds where the fund manager manages a portfolio of shares on your behalf.  

Unfortunately, this is where the trouble starts.

Tony Byrne, managing director of Wealth & Tax Management

Due to the various regulations regarding money laundering and financial crime generally, there are a number of hurdles to overcome first. Most stockbrokers will not accept corporate accounts. This appears to be because they have to carry out lots of financial checks. Such checks include proof of corporate ID and address, a Legal Entity Identifier registration number, Companies House information, bank account details, accounts… The list goes on and on.

In order to set up a stockbroker account, a lot of documentation is required. However, once the account has been opened, life suddenly becomes a whole lot easier. Shares and funds can be traded easily.

Many SMEs have large surplus funds wasting away in bank accounts earning little, if any, interest. Sometimes these balances run into the millions. If you wish to keep the money for working capital, that is all well and good but why not get your hard-earned money really working for you?  

The best performing asset class over the long term has always been shares. Not only do shares produce capital growth but they also pay dividends. For example, the current dividend yield on the FTSE 100 Share Index is 3.62 per cent and that is despite dividend cuts since the coronavirus pandemic started.  

So the income alone from shares beats bank deposit interest significantly, let alone the potential capital growth.

For advice on how to grow the surplus cash in your business, join us for a one-hour Discovery Meeting either at our offices or by video conference call at our expense worth £270 to each of the first five readers who contact us before October 31 2020. You know it makes sense. We offer a great cup of coffee too.

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