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The amount of coordination / bank reconciliation / overhead that would add is absolutely not worth it. It’s completely normal to have $10M+ in cash in a checkin
by mikeyouse 4y ago
The amount of coordination / bank reconciliation / overhead that would add is absolutely not worth it. It’s completely normal to have $10M+ in cash in a checking account for these companies, if I need to make payroll of $500k twice per month + pay vendors, accounts will necessarily have much more than the FDIC limit.
I could find 40 community banks and shift funds around constantly or I could just put it all in JPM and actually worry about running my business.
- makestuff 4y agoAlso the big banks will do overnight sweeps as well to protect customers over the FDIC limit. I’m not sure if smaller banks do this as well, but I know JPM will do it for large customers. From the brokerage side interactive brokers will do it on any cash sitting in your account as well if you opt in.
- scottLobster 4y agoOr you could split it between two banks and reduce your exposure by half. Four banks and you reduce it by 75%. That way a deathblow turns into a setback, and overhead is minimal. There are cash management services that will do this for you if you can't be personally bothered. Running a business means doing the maintenance keeping ship afloat as well as charting a course to exotic destinations.
- mikeyouse 4y agoThose probabilities assume there’s an equal likelihood of going under for each bank which certainly isn’t true. I could just move it to half at WFB and half at JPM and cut my risk by substantially more than spreading it across random community banks.
- gnicholas 4y agoIf I split between SVB and FRB, have I reduced my exposure by half? I agree with GP that using a too-big-to-fail bank seems to be the more practical option.