Is Your Business Cash Safe?
 By Greg C. Horn

The recent economic turmoil has small-business owners looking carefully at their bank accounts. With bank failures becoming a common occurrence, savvy business owners, want to make sure that their cash reserves and working capital are safe and sound.

Whether you keep accounts at bank or a credit union, here’s what you need to know to keep from losing any cash.

Deposit Insurance At Banks
Make sure your business checking accounts, savings accounts and certificate of deposits are deposited with a bank that is covered by the Federal Deposit Insurance Corporation (FDIC).

If your bank fails, the FDIC will return your money, up to the insured maximum. In the 75 years that the FDIC has been in operation, no one has lost a dime on an insured deposit.

The FDIC traditionally insures accounts for up to $100,000 per depositor. But beginning on Oct. 3, 2008, the Emergency Economic Stabilization Act of 2008 increased FDIC insurance to $250,000 per depositor through Dec. 31, 2009.

The “per depositor” clause is worth a closer look. Basically, the sum of all of your deposits at a single bank is insured for up to $250,000, not each individual account.

For instance, if you’re a sole proprietor, you may have business checking and savings accounts in your name at the ABC Bank. You might also have your personal checking and saving accounts at the same bank. In that a case, the total of all of your accounts are only insured up to $250,000.

You should also be aware even if you purchased certain products through a bank insured by the FDIC, FDIC insurance does not cover:

• Mutual funds
• Life insurance policies
• Stocks
• Bonds
• Annuities

However, IRA funds at an FDIC-insured bank are covered up to $250,000. This is considered separate from other types of accounts. So, if you had an IRA and a business account at the same bank, each would be insured up to $250,000.

Don’t put your hard-earned money at risk. To make sure all of your deposits are fully insured by the FDIC, use the Electronic Deposit Insurance Estimator (EDIE). This estimator is an interactive, user-friendly online worksheet. EDIE can calculate insurance coverage of up to 40 accounts, including personal accounts, business accounts, IRAs and other types of accounts. The estimator will walk you through the process.

Deposit Insurance At Credit Unions
The National Credit Union Share Insurance Fund (NCUSIF) is to credit unions what FDIC is to banks. It insures your deposits dollar-for-dollar and is administered by the National Credit Union Administration.

Like FDIC insurance, the limit of NCUSIF insurance has been increased to $250,000 until Dec. 31, 2009. Also like FDIC-insured deposits, the NCUSIF-insured deposit limit of $250,000 is the sum of all of your deposits at a single credit union, not each individual account. IRAs are insured separately up to $250,000.

Actions To Take
Watch your account balances carefully to be sure you stay within the limits of deposit insurance. Open accounts at multiple financial institutions to avoid going over deposit limits.

If you’re confused about the federal insurance on your deposits, ask your banker and/or credit union officer to review your accounts with you.

AFS Can Help
Got questions about deposit insurance? Get answers from the small-business consultants at AFS ProTalk – at no additional cost. AFS Members have unlimited access to the ProTalk consultants.

(Posted November 2008)

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