Don’t be passive about your accounts over $250K
The collapse of Silicon Valley Bank (SVB), followed closely by Signature Bank, earlier this month has a lot of small businesses and startups doing some self-reflecting on the way they manage their finances.
Many businesses that banked with SVB were initially under the impression that deposits with the bank over the $250,000 FDIC-insured limit would be lost. Poof! Gone forever. That would be devastating for most and put some out of business completely.
Within days, however, the federal government told depositors that it would make them whole, even beyond the $250,000 limit. In these two instances, small business depositors dodged a bullet.
But there is no guarantee that the next time a bank fails, the federal government will make such a decision. So, what can you as a small business owner or manager do to protect your assets, especially if you must keep high amounts of operating capital?
One option, like many businesses are now considering, is to spread your funds across multiple banks so that your accounts do not exceed $250,000 at any one institution.
The advantage is you never have to worry about the deposits being insured. But there is a big drawback – the operational headache of working with two or more banks.
Another option is to utilize programs called ICS and CDARS by a company called IntraFi, using a network of banks where you can build up funds across member institutions to gain more than the normal $250,000 in FDIC-backed insured deposits.
You can put as much into the IntraFi system as you’d like, but still have all your deposits operate in one functional account, because IntraFi spreads the money across member banks for you. You’ll get one statement, though your funds are allocated to multiple banks.
IntraFi has thousands of member banks, so if your bank isn’t a member, chances are there is one nearby that is.
The bottom line is that you need to take steps to ensure your money is safe. You probably don’t have the time or banking expertise to know if your financial institution is well-managed.
We can help you develop a strategy for cash flow and deposit management. You may be nervous now, but with a sound strategy, you don’t have to be.