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Don’t Let the Bank Lose Your Money

Mike Berner
Mike Berner

Here’s how your business can prepare for a banking crisis

Is your business in danger of losing all of its cash in a banking crisis? 

Many companies with accounts at Silicon Valley Bank (SVB) were on the verge of losing everything. When SVB collapsed due to mismanagement, business owners with accounts at the bank were left in limbo for days.

While you may think this has no impact on you if you don’t bank at SVB, it’s best to be prepared in case a similar situation arises where you do bank. As a business owner, there is a real risk that you could lose everything if your bank goes bust. Here we review your coverage as a depositor, as well as discuss a few strategies to protect your assets from a bank failure. 

What happened at Silicon Valley Bank

Before diving into the strategies you can use to protect your money, it is crucial to understand what went wrong at SVB. 

In a blink of an eye, SVB went from seemingly fine to totally collapsed. The bank had made some risky investments that went sour, leading to large unrealized losses. In a classic bank run, SVB depositors rushed to withdraw their funds as fear about the bank’s stability spread. SVB rapidly lurched toward insolvency, and regulators quickly stepped in and seized the bank’s assets. 

One issue was that much of SVB’s depositor base consisted of businesses with big cash balances. The Federal Deposit Insurance Corporation (FDIC) insures bank deposits for up to $250,000, but many companies maintain much more than that in their bank accounts. When SVB collapsed, business owners with accounts at the bank were left in limbo for days, wondering if their money was lost forever. 

In this case, the federal government stepped in to make all depositors whole, regardless of how much they had in their accounts. The plan was controversial, and the government is not guaranteed to ride to the rescue again. That is why business owners of all sizes need to understand their coverage under the FDIC. 

>> Learn More: How to Reconcile a Business Bank Account

Understanding FDIC deposit insurance

The FDIC was formed by Congress in 1933, following the devastating bank runs that precipitated the Great Depression. FDIC deposit insurance covers deposit accounts at banks, which include money market accounts, certificates of deposit, and checking and savings accounts up to a certain cap (currently $250,000). If your bank fails, your money is completely safe up to the limit. The coverage is applied automatically, regardless if your bank is a small community thrift or a large national bank. Even online-only banks with no brick-and-mortar branches are eligible for coverage by the FDIC. 

In all the years of the program’s existence, no depositor at an FDIC-insured bank has ever lost a dime under the limit. Before you open an account, make sure that the bank is covered by the FDIC. One effect of FinTech on business is that companies are storing their funds in new types of accounts, but not all of these vehicles are insured by the FDIC. 


You can check if you are insured using the FDIC’s online database BankFind.

How does the FDIC limit work?

The $250,000 limit applies to each individual depositor per bank. For example, if your business has $100,000 at Bank A and $150,000 at Bank B, you are covered entirely in case of a failure at either institution. But if you have $300,000 at Bank B, you could potentially lose $50,000 – even if the money is spread across multiple accounts at that bank. 

Protecting your business from a bank failure

The $250,000 FDIC cap represents a dilemma for businesses. Every business needs a savings account for emergencies, future growth, acquisitions and other strategic purposes. But before you go stuffing your money under the mattress or in a safe, consider these alternative strategies. 

1. Open accounts at multiple banks.

The most straightforward way to deal with the FDIC insurance cap is to simply open business accounts at multiple banks. Because FDIC deposit insurance applies on a per-depositor, per-bank basis, you would be fully covered if you split $500,000 equally between two separate banks. 

This approach should work well if you’re only somewhat over the $250,000 cap. But if your business is holding millions in the bank, opening accounts at many different institutions is obviously going to be a bit unwieldy. It may be a good idea to pair this approach with other strategies if you prefer to streamline your business’s finances. 

Did You Know?

If you open a joint account with a spouse, the $250,000 FDIC cap is doubled to $500,000.

2. Park your cash in short-term U.S. Treasuries. 

Short-term U.S. Treasury securities (aka government bonds or T-bills) are another flexible option to store your business’s cash. These investments are considered “risk-free” because they are backed by the U.S. government. All bonds feature a holding period and interest rate. At the end of the holding period, you receive your initial principal plus interest (usually, the interest payments are made along the way). 

A T-bill is a government bond with a holding period (or maturity) of less than a year. They are available with a holding period of one month (28 days), three months (91 days), six months (182 days) or one year (364 days). You can purchase T-bills through your bank or investment brokerage, or directly from the government on the TreasuryDirect website. 

3. Utilize a cash management account.

A cash management account (CMA) is a tool some brokerages offer that functions similarly to a checking account. With a CMA, the brokerage spreads the money over multiple partner banks. This means you can obtain deposit insurance for $1 million or more, depending on how many banks your CMA provider works with. 

The great advantage of a CMA is that the actual banking takes place behind the scenes. You maintain access to your funds in one central location, and you can deposit and withdraw funds, earn interest, and pay bills just like you would with a regular checking account. 


Cash management accounts offered by some brokerages function similarly to checking accounts at banks.

4. Look into other strategies for excess deposits.

The Depositors Insurance Fund (DIF) is a Massachusetts-based institution that initially served as the inspiration for the FDIC. While the FDIC covers only the first $250,000, the DIF will cover all deposits in excess of that cap. This means that depositors in Massachusetts-based savings banks and cooperative banks have virtually no risk of losing any of their money in the event of a bank failure. 

Credit unions are another alternative to banks. Like bank deposits, members of credit unions are insured for up to $250,000 by the National Credit Union Share Insurance Fund, which is another government-backed entity similar to the FDIC. 

Business owners holding their money in a personal account can also obtain additional coverage if they’re married. A joint savings account with a spouse is eligible for up to $500,000 in deposit insurance from the FDIC because each individual is automatically covered for $250,000. 

Preparing for a financial crisis

As a small business owner, you should always consider how to protect your business during a recession. Like recessions, financial and banking panics have been regular events throughout U.S. history. Take a proactive approach. In addition to not keeping all your banking eggs in one basket, make sure you maintain a healthy level of business debt and properly manage your business’s cash flow. When the crisis passes and the economy improves, your business will be well positioned to bounce back and even gain market share over unprepared competitors. 

Image Credit: Panuwat Dangsungnoen / Getty Images
Mike Berner
Mike Berner
Staff Writer
Mike Berner is a staff writer at and Business News Daily specializing in finance. Mike has a deep background in the financial world, having written hundreds of articles and blog posts on financial markets, business and investing. He holds a B.A. in economics and a B.B.A. in finance, both from the University of Massachusetts, Amherst. Prior to his writing career, he performed quantitative analysis and research as an economic analyst.