Tired of getting a better return on the money under your mattress than the cash in your business checking account? The long wait for interest might be over if a bill introduced by Nydia Velázquez, chairwoman of the House Small Business Committee, finds its legs.
Currently, small businesses are prohibited from earning interest on their checking accounts, which puts them at a financial disadvantage. "Big businesses can afford cash management systems and expertise to effectively get interest rates on checking," says Giovanni Coratolo, director of small-business policy for the U.S. Chamber of Commerce. "Small businesses don't have the overhead or dedicated expertise to do it, and when they [use] sweep accounts and things like that, it becomes very costly. So it's really a fairness issue."
On the downside, Coratolo adds, the best banks may raise prices on certain small-business products and services to offset the added cost of interest if the bill passes. "The irony of it is, this would be morth more if interest rates went up, which small businesses would not want to see happen," he says. But certainly, he notes, for entrepreneurs who need to keep a substantial amount in their checking accounts, any return--however small--could mean a lot to their bottom line.
The bill, known as The Business Checking Fairness Act of 2007, has been introduced in some form or another several times over the past few years, but with a new Congress in session, it may have a better change of passing. "We assume it will turn out will," says Coratolo. "But we'll have to wait and see."