Banks promise safety but often less savings solutions for businesses. What if there was a way you could enjoy higher returns on business cash while ensuring your funds remain safe? 

Safety remains a foremost consideration for business owners looking to manage business cash. Bank business accounts are traditionally seen as the “safe option”, but issues such as low returns and high fees make them less than ideal. Afterall, business cash sitting in a basic bank account becomes exposed to inflation, a risk that only gets worse over time. 

Cash management accounts offered by fintech platforms can provide higher returns and comparable service levels such as next-day withdrawal times. But are they safe? Yes; from cash segregation to licensing requirements and tight regulations, cash management accounts have built in guardrails to protect your funds.

That’s not to say cash management accounts are completely free of risk. They are investments, which means your funds are exposed to market risk. In this blog post we will explain how a cash management account protects (and grows) business cash, and what business owners should know when choosing one.

5 questions to know if your business cash is safe in a cash management account

Is the platform regulated by MAS?

The Monetary Authority of Singapore (MAS) is the central authority that oversees everything related to financial markets and matters here on our sunny island. It regulates all entities offering financial services here, including cash management accounts. Any organisation or company wishing to offer financial services in Singapore must be licensed by the MAS before they can do so. 

So the first thing to check is whether the fintech account you are considering has obtained MAS approval – and that it is holding the proper license for the financial services it offers. 

For cash management accounts, you’ll want to make sure that the entity has a Capital Market Service (CMS) license. You can look up the CMS license number in MAS’ official directory to verify the regulatory status of the platform you’re considering. 

For example Chocolate Finance is a brand of Chocfin Pte Ltd (UEN 202347190R). Chocfin Pte Ltd is licensed and regulated by the Monetary Authority of Singapore (CMS101452) to perform fund management activities. 

Are funds held separately?

What happens after you have put your funds into a fintech account? How can your business cash be protected from improper or illegal use by the cash management provider?

One simple and elegant solution is to have customer funds held separately from operating funds. This way, business cash is segregated and managed by a different party (more on this later). Meanwhile the cash management platform continues providing its services using its own operating funds. 

Under such a framework, customer monies and operating funds are never mixed together. This ensures that should the provider become insolvent, your business cash is shielded from creditors, thus remaining safe and accessible to you. 

Who’s the actual custodian of your funds?

Segregating customer funds isn’t merely lip service. It involves appointing a qualified third party as custodian. In this, the choice of custodian is just as important.

Make sure to find out exactly who is holding your segregated funds. This entity should be properly licensed to carry out such duties, and ideally should have a proven track record in this area. 

In Singapore, fintech platforms often appoint major banks, asset managers, or brokerage clearing firms as custodians. These organisations’ have established systems and capabilities enable them to safely hold customer funds separate from company balance sheets. 

For example the custodian for the underlying funds of  the Chocolate business account is HSBC Trust. 

What’s the risk of the investment? 

As mentioned earlier, cash management accounts differ from bank accounts in that your funds are invested (that’s where the higher returns come from). This means that business cash in a cash management account is exposed to market risk. 

Risk need not be problematic, unless it’s uncontrolled or unknown. Cash management accounts are mandated to disclose the underlying funds or assets they invest in, so you can check to see if the investment matches your risk profile. 

Cash management accounts typically invest in a mix of low-risk assets such as money market funds, short-term bonds, cash and equivalents. 

These are some of the lower risk assets on the market – yet still capable of returns that far outstrip the base interest offered by basic bank accounts – making them a good choice for growing business cash. 

Chocolate Finance business account is currently made up of 2 underlying funds: LionGlobal SGD Liquidity Fund Class (I) and LionGlobal SGD Liquid Plus Fund Chocolate Class.

How are the returns? Who bears the shortfall?

Cash management accounts draw their returns from the combined performance of their asset mix. As different cash management accounts may invest in different instruments (or in varying degrees), producing higher or lower returns. 

This is why it’s worth comparing return rates among the different cash management accounts on the market. Besides checking the current returns rate (which fluctuates inline with broader market trends), do also look at past rates of returns. You’ll want to look for consistency on the returns - not just one off promo rates, whilst also considering risk, liquidity and fees.

Now here’s the other side of the coin. Investments rise and fall, so there may be periods of shortfall. In some cash management accounts, shortfalls are borne directly by the investor – yes this means there could be a dip in your balance when the markets are down. 

However, not all fintechs are the same. Chocolate Finance provides a Top-Up Programme, making up any shortfall in your daily returns (capped at specified limits). This means, during the Qualifying Period,  you won’t have to worry about market volatility affecting your business cash under S$300k.

Read on to find out more ways Chocolate Finance is different from other cash management accounts.

Safety and happy returns with Chocolate Finance Business account 

With Chocolate Finance, you can enjoy the best of both worlds. You can enjoy good returns on your business cash, and the assurance that your funds remain segregated and safe.

Chocolate holds a Capital Market Services license, and is regulated by MAS under the Securities and Futures Act. Customer top ups  are held separately by our appointed custodians – HSBC for the Chocolate Business account, are not part of our balance sheets, and are ringfenced from creditors in the (very unlikely) event of insolvency. 

Our track record also speaks for itself. Since inception, Chocolate Finance has maintained market-leading returns in Singapore for our retail SGD accounts. And we’re keen to repeat this feat. 

With Chocolate Business, enjoy 1.5% p.a. returns on your first S$300,000 – backed by our Top-Up Programme – and up to 1.5% p.a. on any amount above that. There’s no lock-in period, no fees, and no hoops to jump through, just happy returns credited to your account daily. 

Need to access your business cash? Same-day withdrawals for amounts below S$50k and before 8am SGT on any business day, so your money's never far from reach.

Honestly, it doesn't get any better than that. So don’t miss out. Sign up for the Chocolate Business account now! 
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Disclaimer

Chocolate Finance is a brand of Chocfin Pte Ltd and is regulated by the Monetary Authority of Singapore. The views and opinions expressed on this post are solely those of the original authors and contributors as of the date of this post and are subject to change based on market and other conditions. This is for information only and does not constitute an offer or solicitation to buy or sell any of the investments mentioned. Neither Chocfin Pte. Ltd. (“Chocfin”) nor any officer or employee of Chocfin accepts any liability whatsoever for any loss arising from any use of this blog or its contents.

Please note that Chocfin does not guarantee the accuracy, relevance, timeliness, or completeness of the information provided on this post. The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them. Chocolate’s returns are currently supported by a promotional 'Top-Up Programme', valid during the Qualifying Period and subject to terms and conditions. Past performance is not indicative of future results. All investments involve risk, including the risk of losing all of the invested amount and may not be suitable for everyone. This advertisement has not been reviewed by the Monetary Authority of Singapore.

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