Where should business owners put excess cash as interest rates decline?

Interest rates are starting to move lower. For business owners, this creates a new question: what should you do with excess cash? Holding it in the bank might feel comfortable, but opportunity costs are changing. Here are four options worth weighing up.

1. Reinvest into your business

Growth is often the best use of capital. Whether that means new staff, marketing, technology, or product expansion, backing your own business can deliver returns far higher than passive investments. If you see opportunity and can execute well, reinvestment should be top of mind.

2. Diversify into investments

Excess cash is a chance to build wealth outside your business. Property, shares, or other income-generating assets can reduce reliance on a single source of income. A diversified portfolio also provides liquidity and protection if business conditions change.

3. High-interest term deposits

Term deposits still offer attractive yields, but they come with trade-offs. You’ll need to weigh credit risk and liquidity. Locking up funds for a year might not be the best move if your business suddenly needs cash.

4. Pay yourself more as a director

This option is often overlooked. Yes, you’ll pay more tax if you draw higher income, but there’s a strategic advantage. Taking cash out of your business can strengthen your personal borrowing capacity, opening the door to grow your property portfolio. Over time, this creates income and diversification while still leaving your business intact.

There’s no one-size-fits-all answer. The right mix depends on your growth ambitions, risk appetite, and borrowing goals.

At Flexdoc, we work with self-employed entrepreneurs to structure these decisions so that business and personal wealth work together. Start your journey now.