Term deposit for businesses: the best alternative in 2025

When you run a business, every pound counts. Yet too many SMEs, sole traders and microbusinesses let their cash reserves sit idle, simply because they lack a clear, simple and accessible way to make their money work. And that comes at a cost. Leaving money stagnant in a non-interest-bearing account means losing purchasing power every day—especially in today’s economic climate, with inflation at its peak. In short, you’re losing money year after year.

The business term deposit has long been the go-to solution to invest surplus cash with minimal risk. But in 2025, this product is showing its limits: rigidity, locked-in funds, and more.

Today, a smarter alternative exists—more flexible, more transparent, and designed with today’s professionals in mind.

In this article, we’ll explain how a business term deposit works, its benefits and its drawbacks. But more importantly, we’ll show you why it no longer measures up, and how to switch to a better alternative that combines flexibility and return.

Summary

1. What is a business term deposit?
2. Why business term deposits are no longer enough in 2025
3. The best alternative to a business term deposit
4. FAQ

What is a business term deposit?

A term deposit—also known as a fixed-term deposit—is a type of savings product. While it’s available to individuals, it’s more commonly used by businesses. It allows you to invest surplus cash for a set period in exchange for a fixed return.

Here’s how it works:

1. You deposit a specific amount of money
2. You agree a fixed investment term with your bank—this can range from 1 month to 5 years, and determines your interest rate
3. Your funds are locked in for the full term: early withdrawals are possible, but usually come with penalties
4. At the end of the term, you receive your original deposit plus interest

There are three main types of business term deposits, each with a different way of calculating interest:

Fixed-rate business term deposit

This is the most traditional format. Your money is invested for a set period at a pre-agreed interest rate.

Advantages:

• Guaranteed return with no surprises
• Full visibility on your final gain
• No risk from market fluctuations

Drawbacks:

• If rates rise during your term, you miss out on better returns
• Your funds are locked in—you’ll pay penalties if you withdraw early and may lose all your interest

To summarize, this is a safe option if you’re certain you won’t need the funds before the end of the term.

Progressive-rate business term deposit

With this format, the bank incentivises you to keep your funds invested longer. The longer you leave your money untouched, the higher your interest rate becomes. For example: 1.60% in year 1, 2.10% in year 2, 2.60% in year 3, and so on.

Advantages:

• Higher interest rates if you stay invested for several years

Drawbacks:

• If you withdraw funds early, you miss out on the most attractive rates and may face penalties
• It can take years to reach a decent return

To summarize, this option may suit businesses with long-term surplus cash and a solid buffer to handle any unexpected needs.

Variable-rate business term deposit

This product is linked to a benchmark interest rate, such as the 3-month Euribor or the rate on a government savings account.

Advantages:

• You benefit if rates rise
• Potential to earn more than with a fixed-rate term deposit
• A more dynamic investment strategy

Drawbacks:

• Your return could fall if rates drop
• Less visibility on long-term earnings

To summarize, this type of deposit may appeal to more experienced business owners who are comfortable with some level of uncertainty in exchange for potentially higher returns.

Why business term deposits are no longer enough in 2025

For years, business term deposits have been a go-to solution for managing cash reserves. But today, they clearly fall short—especially for small businesses and independents.

Lack of flexibility

When you place your business funds in a term deposit, you agree not to touch them for several months or even years.

But let’s be honest—no small business, startup or independent professional can predict the future of their activity with complete certainty. Unexpected expenses, urgent cash flow needs… You can’t afford to lock away thousands of pounds in an “untouchable” account. And you’re not alone.

That’s exactly why term deposits aren’t right for most modern businesses: they simply lack flexibility.

Low accessibility

A business term deposit usually requires a significant initial deposit. It’s rare to find one that accepts less than £10,000. That’s a large sum to set aside—especially if you need to part with it for years.

What’s more, you can’t add to or withdraw from your deposit during the term. That makes it poorly suited to businesses with fluctuating cash flows. In today’s fast-paced environment, that’s a serious drawback.

No day-to-day access

With a traditional term deposit, you only receive your interest at the end of the agreed period—months or even years later. Until then, your money is working, but you see no return.

And if you do withdraw early, you usually lose all your interest.

It’s a rigid system—designed for companies that can afford to tie up their cash long term. But most entrepreneurs today can’t just sit back and wait. They need to see the benefits of their capital every day.

A flexible alternative to the business term deposit

At Vivid, we believe your cash reserves deserve better than a rigid, outdated product. You deserve a solution that adapts to your business — not the other way around.

Vivid is a neobank built for small businesses that want to move fast—without being held back by traditional banking tools. You can open a business account in just a few minutes, with several plans available, including a 100% free one.

Open your Vivid account now, for free

In addition to these everyday tools, we offer a smart, modern alternative to the traditional business term deposit: the Vivid Interest Account.

How does it work?

You can open your Interest Account quickly and easily online, straight from your Vivid space.

It’s a separate account, designed specifically to hold your business reserves. You can fund it at any time, directly from your main business account.

• Every day, your balance earns interest — calculated automatically based on your daily balance and paid into your Interest Account daily.
• The rate is fixed and transparent — no surprises. It varies depending on the plan you choose.
• There’s no minimum deposit, no fixed term, no maximum cap, and no withdrawal fees. Your funds remain available at all times!

In short, it’s the ideal account to grow your reserves without the usual constraints of traditional banking products.

For those looking to go further, Vivid also offers investment strategies with higher potential returns. Choose from three portfolios with different levels of risk and reward—offering up to 5% annual interest.

To benefit from the Interest Account and everything else Vivid offers, open your Interest Account in just a few clicks.

FAQ

Can I withdraw my money at any time with Vivid?

Yes. That’s one of the key advantages of the Interest Account. You can invest without commitment, withdraw without fees—whenever you like. You don’t need to give up control of your cash to make it grow.

Can I open a Vivid Interest Account if I’m a sole trader or freelancer?

Absolutely. The Vivid offer is built to be accessible to all business types: sole traders, freelancers, microbusinesses, SMEs…

You don’t need a complex structure or large capital to grow your reserves. It’s a flexible, entry-level solution designed to support your growth—from the very first pound.