How to keep your business deposit cash safe during a banking crisis

You might think that small businesses, which are more likely than the average depositor to have accounts above the federal deposit insurance limit of $250,000, might be uneasy about the U.S. banking system. And you would be right.

The past two months have been rough on the U.S. banking system: Three fast-growing regional banks failed in succession when depositors lost confidence in the banks’ stability and yanked their money, culminating in the over $100 billion pulled from First Republic Bank and eventual sale to JPMorgan. JPMorgan CEO Jamie Dimon declared “this part of the crisis is over” after his bank’s deal, but the volatility in regional banking stocks continued on Thursday, with shares of PacWest plunging.

But small business owners have other worries on their minds when it comes to financial relationships and risks. For one, higher interest rates and more difficulty getting access to capital including loans to grow. And at a time of higher prices on many core business inputs, a rush to switch financial institutions as part of risk management, even with the best of intentions, could lead them to overpay in bank account fees and sacrifice valuable, high-touch relationships.

Right now, small business owners are split about evenly between those who express confidence in America’s banking system and those who do not (49% vs. 50%), according to the Q2 CNBC|SurveyMonkey Small Business Survey released on Thursday morning. A majority (62%) say they are confident their business capital is secure. But fewer (53%) say it is easy for them to access the capital needed for their business to operate. With lending expected to tighten further in the wake of the three banks’ failures, and another interest rate hike by the Federal Reserve on Wednesday pushing business loans firmly into double-digit percentage territory for many borrowers, the worries will persist.

Kirsten Quigley, the CEO of Lunchskins, a Bethesda, Md.-based small business that sells environmentally friendly sandwich bags, said the interest rates on the loans Lunchskins uses for working capital have more than doubled in the past year. “When you’re funding your growth with that kind of debt. It really takes a toll on your cash flow,” said Quigley.

The regional bank she uses, Eagle Bank, isn’t anywhere near the “too big to fail” category.

But she values the personal attention she gets for her firm, which was founded in 2008 and is now in more than 13,000 grocery stores nationwide, including Walmart, Target and Kroger. In March, the CEO of the Bethesda-based Eagle Bank, which has 14 locations, sent a note to its customers assuring them that it has ample reserves. “It’s a physical office and physical person,” Quigley said. “When I call, they call back.”