Commercial Banking Best Practices
We were thrilled to host the executive team of First Women’s Bank last week for a discussion of banking best practices in the wake of SVB. We heard from so many of you who wanted to attend but were unable for a variety of reasons (life!), so we wanted to pass along some of the key takeaways from our conversation. Many thanks to the FWB team for making time join us in the middle of what we know was an absolutely crazy time for them: Marianne Markowitz (CEO), Melissa Widen (General Counsel), Emily Mattes (Vice President, Business Banking), and Colleen Ryan (Chief Marketing and Communications Officer).
What should I be looking for when I’m searching for a bank?
Despite its eventual downfall, one of the things that SVB got right was its emphasis on client relationships. Many venture funds and startups are now being pushed from SVB into the traditional banking realm, and they are faced with the prospect of building and maintaining a personal relationship with a new bank. As you reassess where to keep your money, consider whether your banker really understands your company, if they will be thoughtful about your deposit strategy or your access to capital, and if you will have someone you can call or email directly when you have a question or problem. Will that person respond over the weekend or when you need them urgently? The goal here is specialized attention with an emphasis on building an impactful client relationship.
You should also make sure that the bank is FDIC insured (more on that below) and that you understand the bank’s products and services and how they will align with your business’s needs. Also consider whether a mission driven bank is important to you. FWB focuses on closing the gender lending gap at a national level – women-owned businesses are growing 2x faster than the national average, yet they receive just 16% of all conventional business loans and just 4.4% of the total dollar amount. You may want to think about whether your deposits will make a similar impact at a traditional bank and if your banking aligns with the mission of your business.
Should my business keep its money with more than one bank?
Some businesses are reluctant to hold accounts at more than one bank due to the added administrative burden, particularly for small companies that may not have substantial finance teams. With the recent disruption in the industry, however, companies are looking to diversify their banking relationships and are willing to take on this operational lift. Maintaining an account with more than one bank minimizes your risk across accounts and allows you to build relationships with more than one banker. If your relationship manager leaves one bank, you will have another personal banker at the other and won’t be faced with building a new relationship from scratch in a tight timeframe.
How does FDIC insurance work?
In general, the FDIC insures up to $250,000 per depositor, per insured bank. In the roughly 48 hours between SVB’s collapse and the government’s announcement that all depositors would be made whole, the prospect of walking away with just $250,000 of FDIC insured funds was devastating for most SVB clients. So how can you access more FDIC coverage in the future? Many banks participate in insured cash sweep products that can significantly increase FDIC insurance. In broad terms, your deposits are swept through a network of member banks that each provide insurance in $250,000 increments. Many banks (not FWB) charge a fee for this type of account. For companies that have recently closed a financing round or for funds that have called capital but are waiting to deploy it, this can provide much needed comfort in a post-SVB world.
How many accounts should we have?
Another FDIC tip: you receive $250,000 of insurance for each account opened with a separate EIN. If your business is structured with multiple affiliate entities, each of those accounts gets its own layer of insurance coverage. However, despite what many of us have heard over the last month, opening multiple accounts (e.g., one checking account, one savings account) under the same EIN does not increase your FDIC insurance. The $250,000 limit is per depositor—not per account.
What else can banks offer besides checking accounts?
Banks can offer a suite of products and services tailored to your business needs, including fraud protection, loans, treasury management, digital products for small businesses, networking and mentoring resources, and specific advice on the right accounts for your company (e.g. checking, savings, certificate of deposit, and money market deposit accounts). Be sure to ask about a bank’s full offerings when deciding where to keep your money.
I'd love to check out FWB—who can I speak to?
The FWB team will be glad to answer your questions and discuss your business – you can reach out directly to Melissa (email@example.com) or Emily (firstname.lastname@example.org).