Four Ways to Protect Your Business from Bank Failures
Published on May 8th, 2023 | By Anthony Glomski | Leave a Comment
Table of Contents:
Bank failures like those with Silicon Valley Bank, Signature Bank, Credit Suisse, and First Republic Bank can have significant consequences for businesses, including loss of funds, disruption to operations, and impact on credit and loans. As a business owner, it’s essential to take proactive steps to prepare for potential bank failures and mitigate the impact on your business. Here are some key concerns to consider:
Key Concerns to Consider:
- Which banks should you use and how can you diversify your deposits to reduce the risk of losing all of your funds in the event of a bank failure?
- How can you preserve your money during inflation and maximize your yield?
- What are the potential impairments to your operations due to a bank failure and how can you minimize their impact?
I remember a personal story about my friend’s father, who had $1 million in a bank in 2008. Despite the advice of well-meaning people, he kept his money at his bank in a mix of savings, checking, and CDs. Unfortunately, the bank failed, and he lost $750,000. Unfortunately, not all banks get bailed out. This story highlights the challenges for businesses that maintain deposits above FDIC limits and are equally at risk in the event of a bank failure.
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Steps You Can Take to Protect You and Your Company:
1. Select user-friendly and FDIC-insured banks: Choose the most user-friendly bank that works with your operations – tech, customer service, and other factors. Make sure that the bank you choose is FDIC-insured and that you stay within the insured limits.
2. Have a backup bank account: Select a second bank and leave a small deposit. This redundancy can be crucial if the first bank has issues or fails. A backup bank account can ensure that your business can continue to function smoothly in the event of a bank failure.
3. Seek out specialized programs: Look for specialized programs that provide full FDIC coverage on $25 million+ with competitive yields and 100% liquidity with no redemption gates. In addition, these programs should have the highest AAAkf rating by KBRA and include hundreds of pre-screened depository institutions. Connect with us to learn more about these programs to help protect your business.
4. Consider treasury management and short-term investments: Treasury management can help you opportunistically invest in short-term treasuries with various maturities. Brokerage accounts with FDIC insurance, SIPC coverage, and additional coverage with programs like Lloyd’s of London can also provide liquidity and extra layers of protection. In many cases, these investments are not subject to state income tax.
Final Thoughts:
Early reports stated that more than 85% of bank deposits at Silicon Valley Bank were not insured. It’s crucial for businesses to be prepared for potential bank failures and take the necessary proactive steps. By selecting user-friendly and FDIC-insured banks, having a backup bank account, seeking out specialized programs, considering multiple levels of protection, and considering treasury management and short-term investments, you can minimize the impact of bank failures on your business operations. Don’t wait until it’s too late – take action now to safeguard your business’s financial future.
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Meet Anthony
Anthony Glomski is the founder of AG Asset Advisory, an internationally recognized SEC-registered Family Office. His team works extensively with entrepreneurs so they don’t miss out on any potential opportunities and they get the results they want. This collaborative process addresses an array of family, financial, and lifestyle concerns along with coordination and oversight of various professionals to keep everyone focused tightly on their goals.
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Meet Anthony
Anthony Glomski is the founder of AG Asset Advisory, an SEC-registered Family Office. His team works extensively with successful entrepreneurs so they don’t miss out on any potential opportunities and get the results they want. This collaborative process addresses an array of family, financial, and lifestyle concerns along with coordination and oversight of various professionals to keep everyone focused tightly on their goals.