While you might have struggled with cash flow when you first started your business, your company now has surplus cash in its bank account. Whether you're saving it for a big equipment purchase soon, or planning an expensive launch into a new market sometime in the future, why not consider making these funds work for you until you are ready to use them?

One smart strategy for surplus funds is to invest so that your money will be working for your business even while you're waiting to use for your future growth plans. Here are some short-term, medium-term, and long-term investment options to put your business' money to work now to achieve your future goals.

What to do with extra funds in the short-term?

If you have funds that you will need to use in the next 12 months, you might be hesitant to invest them since you'll need them soon. There are a number of short-term investment options that have little to no risk and will still allow you to earn interest while you're waiting. Here are some things to consider:

Cash reserves

Before you invest your funds, it's important to ensure that you have enough in your cash reserves. Financial experts recommend that a business have a cash reserve to cover anywhere from three to six months of a company's normal expenses. Think about it like an emergency fund for your company. These funds can be kept in a high interest savings account or a money market account.

Money market funds

A money market fund is a mutual fund that invests in highly liquid and near-term investments. These include things like cash, cash equivalent securities and debt-based securities with short-term horizons. Money market funds offer businesses high liquidity and very low risk. Should you need your funds, you can easily get them in a few business days. While there are generally no guarantees on the interest earned by the funds, some offer regular dividends and many invest primarily in vehicles with guaranteed returns that are higher than what you would make in a savings account, making a return likely.

Guaranteed Investment Certificates

Guaranteed investment certificate (GIC) is like a savings account that typically holds a fixed amount of funds for an agreed period of time such as one month, six months, or one year. In return for the guarantee that you will not touch the funds, the bank pays an elevated interest rate on the amount deposited. This is a great way to make additional interest on your funds over a short period, however if you're unsure when you'll need the funds, you should be careful what you invest as there can be penalties if you need to take the funds out earlier than planned unless you've chosen a redeemable GIC that allows you to take your funds out at any time.

High interest savings accounts

A high interest savings account (HISA) is a savings account offered by banks that provides a higher interest rate than typical savings accounts. Look for an HISA that best suits your needs when it comes to the set minimum balances and fees. The upside of a high interest savings account is that you'll be able to access your money whenever you need it.

What to do with extra funds in the medium-term?

Maybe you have plans to build a new plant or maybe you're waiting for the market to be right to make a big investment in a new product line. Whatever the reason, if your business has funds that it won't be needing for the next three years, you can consider other investment options that have more risk than you might want to take with a shorter timeline. Here are some investments to consider:

Non-redeemable and specialty GICs

Non-redeemable GICs are investments for a fixed term at a fixed interest rate. Once your term is done, you get your investment back plus interest. Specialty GICs include things like market linked GICs that provide you with a guaranteed return and link your investment to the performance of an underlying index like the S&P 500 Index or the TSX 60 Index. These usually offer a better return than other GICs if the overall market is strong.

Mutual Funds

Mutual funds, which pool money from many investors to invest in securities like stocks, bonds, and other assets, are managed by professional money managers like Scotia advisors. Since you can potentially lose money in a mutual fund, there is more risk to these funds than some other investments, however many mutual funds historically perform well. Mutual funds have different purposes so be sure to read the investment objectives in a mutual funds' prospectus. That way, you can choose an investment strategy that best fits your risk tolerance.


A bond is a loan taken by a company or a government where the funds come from investors instead of a bank. In exchange for capital, the company or government entity pays interest at regular intervals and returns the full principal upon the maturity of the loan. Bonds are historically very stable investments and so are potentially a good choice as a medium-term investment for your business.

Dividend paying securities

Dividend paying stocks can provide consistent income by paying dividends at regular intervals. You can choose to reinvest the funds from the dividends into purchasing more stock or use them to fund expenses within your company. Securities are higher risk, but if you focus on dividend paying stocks that have historically had little price volatility, you might be able to find a stable investment to grow your cash until you need it.

Exchange traded funds (ETFs)

ETFs are investments funds that are traded on stock exchanges. In many ways, they are similar to mutual funds in that they can hold investments like stocks, bonds, currencies, commodities, and other assets, but most ETFs are index funds. They often offer similar opportunities and risk as mutual funds without the cost of management fees. Look into if the ETF is actively managed, if it isn't, it can't adjust their investment strategy in a downturn.

What to do with extra money in the long-term?

Are you building cash reserves to purchase another business or expand into a new sector? If so, you might not be using those funds for many years. In that case, you have more time to invest your funds so that they continue to work for your business in the meantime. With longer timelines, you're likely able to take on more risk in your investments. Here are some investment options to consider:


Whether you manage a self-directed portfolio or enlist an advisor to help you manage your stock purchases, investing in securities provides the possibility of greater growth – which can also come with additional risk. If you have longer time horizons, it might make sense to put some of your funds in the stock market because of its historically high return.

Investment properties

Don't need to use your extra cash for a longer period of time? You might consider purchasing an investment property or a rental property to take advantage of the growth potential of real estate. However, given the fluctuating nature of the real estate market and the transaction costs involved, many experts suggest only investing in real estate if you don't plan on selling for 10 years or longer.

Business-owned life insurance

Corporate-owned permanent life insurance can be a great investment for your small business, and not just to protect your company in case you suddenly pass away. Permanent life insurance allows you to save and invest money tax-free in the cash value portion of the policy which you can borrow against as collateral, take a loan from, or surrender the policy for a payout at a future date.

Get help with your investment strategy

Investing funds that you don't currently need for your small business can be a great way to make the most of your assets when you're not using them. However, it's important to make sure that you choose the best investment strategy for you. That means it should fit your risk tolerance, diversifies your assets, and allows your capital room to grow within your investment timeline. If you're unsure what's right for your business needs, get the advice of a Scotia Small Business Advisor to help you plan the ideal investment strategy for you.

Ready to grow your business or just want to get started? Come in and have a conversation with our Scotia advisors to take your business to the next level