What to Do If Your Bank Fails



Entrepreneurs are virtually hard-wired to worry about the solvency of their own businesses, but how often does it enter your mind that your bank might go under because it cannot meet its obligations? When that happens, it can rock the very foundations of your little company. Fortunately, there are some things you can do to soften the blow.

Don’t Panic

If rumor has it that your financial institution is in trouble, Depression-era images of hordes of desperate people breaking down the doors of banks might rush to your mind. The good news is that the Federal Deposit Insurance Corporation insures each depositor for $250,000 per insured bank. In the majority of cases, your bank’s ownership may change, but you will be virtually unaffected. If a new owner cannot be found, the FDIC will disburse your funds to you. If you also used your banks credit card processing services for your business, you must take steps to immediately find a new merchant services provider.

Don’t jump at the first company you read about online. Read the fine print carefully to determine any hidden costs as well as what you will pay to process each transaction. If it seems too good to be true, it probably is. Seek an institution that offers live customer support, a solid reputation, and positive objective reviews.

What Happens to Your Loan/Borrowings?

The short answer is that if your loan is in good standing and you have been paying on time, you probably have nothing to worry about. The new owners of your bank want nothing more than to have customers like you who hold true to the terms of your agreement and pay on time. You might even find that your new bank is a better fit to meet your needs, potentially providing higher lending limits, more modern technology, and enhanced services.

If, however, you have had difficulty making payments or following loan terms, you probably recognized that you were in trouble even before the news hit about your bank. No matter what happens to your financial institution, it is incumbent upon you to boost your revenue, increase cash flow, or consider selling some of your assets.

Don’t Stop Making Payments on Loans

Don’t assume that all of your obligations cease once you get the news that your bank is in trouble. That’s one of the worst moves you can make. For one thing, you don’t want the FDIC breathing down your neck. If and when new ownership takes over, they too will be very vigilant about all of their customers and may have plentiful resources to sue you for delinquency.

In general, it is always an excellent idea to maintain a warm working relationship with your banker, taking pains to document all activity. If the time comes when you have problems making a payment, be forthright about it. This transparency won’t guarantee anything, but it will let your bank know that you are at least making the effort to stay in touch.

Keeping your business afloat is hard enough on its own. Should the time come when your financial institution collapses, it can feel very disorienting and even frightening. However, your chances of being relatively unaffected by the disaster are vastly increased if you have a history of conscientiousness, regular payments, and transparency.