Today, investment platform Lightyear announces the launch of small business investment accounts for freelancers and sole directors in the UK. This launch comes alongside a brand new partnership with BlackRock to bring access to Money Market Funds for UK businesses without the high fees or minimum investments.
New business accounts mean freelancers can invest and earn interest on company money
In 2022, the Federation of Small Businesses estimated that the UK was home to 5.5M private sector businesses; 4.1M of which had no employees.1 This is the target market that is woefully underserved by financial institutions. Business accounts with high street banks are hard to get and pay out little-to-no interest. Freelancers and sole director businesses in particular rarely get access to these, and often must go through a long, arduous process to access the stock market. New options appeared in recent years from the fintech sector, but they often still don’t allow sole directors to open business accounts, and most don’t pay out interest on uninvested cash.
With another interest rate hike on the horizon, Lightyear’s launch of business accounts helps freelancers and sole director companies make the most of their company funds, ensuring that excess corporate cash isn’t eaten up by inflation while sitting in bank current accounts.
Whilst sole directors are the largest and most underserved segment of the market, access to investment accounts isn’t just an isolated problem for them; the broader business investment account market in the UK is in need of a shake up. Lightyear is looking to open up its business offering to all types of SMEs and larger startups over the coming months.
Lightyear partners with BlackRock to make Money Market Funds available to investors
For UK businesses, Money Market Funds are traditionally hard to access, with options in the market reserved for large corporates who can buy in with a £1 million minimum investment. These funds are normally accessed via business investment accounts that you can only open once you’re a business of a certain size. MMFs track the real interest rate, a privilege usually reserved for larger companies.
Lightyear’s partnership with BlackRock, the world’s largest investment company (by assets under management), will give business and retail investors access to MMFs without the traditional £1m minimum investment criteria. In addition to giving 4.5% interest on uninvested GBP, the platform now has a strong product for UK investors to make the most of global high interest rates with both cash and investments. BlackRock’s GBP money market fund currently returns 5.14% p.a (gross yield, subject to daily fluctuations and gross of fees).
Martin Sokk, Co-founder and CEO at Lightyear, says: “The retail investment market has come a long way in the last ten years or so. Don’t get me wrong – it still has problems (which Lightyear is trying to solve) but the business market is miles behind. In fact, for the UK’s ‘solopreneurs’, it basically doesn’t exist. So, I’m particularly excited about today’s launch of our business investment accounts and MMFs; we’re helping businesses actually benefit from the increasing interest rates – something which they just can’t do with banks. We’re first focusing on the largest, but most underserved part of the market – sole owner businesses – then we’ll open this out to multi-user and larger businesses in the next few months. So watch this space!”
Taavet Hinrikus, Co-Founder of Wise and startup investor adds: “Businesses in the UK need to make sure their cash is not draining its value against inflation, but they currently don’t have enough options to do this. With today’s high interest rate climate, Lightyear’s launch of both business investment accounts and MMFs is a timely step towards helping entrepreneurs put their cash to work. Their new business accounts enable freelancers to earn interest and invest their otherwise stagnant cash, and their BlackRock MMFs partnership introduces these entrepreneurs to a whole new area of investing, previously reserved for larger corporates. With millions of businesses in the UK who can benefit from these launches, it’s a very exciting move for the sector.”