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Business owners should keep this in mind when it comes to banking

Business owners should keep this in mind when it comes to banking
Business owners should keep this in mind when it comes to banking 02:28

NORTH TEXAS ( – Local financial experts say that for most Americans, there's no reason to worry after the second-largest bank failure in U.S. history.

Regulators seized control of First Republic Bank on Monday and accepted a bid from JPMorgan Chase for virtually all of the lender's assets. It is the third financial institution taken under government control in the last two months.

The FDIC's $250,0000 insurance limit is high enough to cover their deposits. However, for local small business owners, there are some things to keep in mind.  

About 90% of Toby Haynes' business revolves around doing payroll for small businesses.  

"A business that I usually work with is going to be one to 50 employees, or it could be up to 100 employees depending on the type of business," said Haynes, owner of Payroll Vault Argyle, Texas. 

Some of them bank with regional or mid-size banks.

News of three failing in less than two months has produced a level of concern given currently, FDIC insurance generally only covers $250,000 per depositor, per institution, per ownership category. 

"Any small business owner is going to see things like that and also want to be able to manage that risk," Haynes said. 

"For most people, $250,000 or $500,000 is a lot of money, but for a small business $500,000 might be a month's payroll and if you're only insured up to $250,000 does that mean they have to have two different banking relationships, so they have everything covered," SMU Southwestern Graduate School of Banking Chief Academic Officer William Chittenden said. 

The FDIC is now re-thinking the decades-old limit, recommending raising insured deposit limits for business accounts that pay for company operations like payroll. If Congress agrees to its new proposal, this could help ease industry turmoil. 

"I think it's a natural extension for the FDIC to consider business accounts, increasing that, and again I would not be surprised if it went up to $1 million or potentially even more," Chittenden said.

For now, Haynes recommends small business owners with more than $250,000 in deposits should diversify.

"You want to put those funds in different banks.. two to three banks.. and also large vs. regional - mix it up," he said. 

Also, he says small businesses should:

  • Background check banks
  • Meet with reps every year
  • Have large lines of credit available

"Always have about a third of your monthly expense budget as an emergency fund," he said. 

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