How Business Leaders Can Protect Their Interests Amid Potentially More Collapses
With the ongoing economic uncertainty and financial turbulence, there has been a lot of speculation about the potential for more bank failures in the near future. As a business leader, it’s essential to stay informed and prepared for any changes that may occur.
Recent Bank Failures
There were two recent bank failures in the US: Silicon Valley Bank and Signature Bank. Silicon Valley Bank failed on March 10, 2023, and Signature Bank failed on March 13, 2023. Both banks were insured by the Federal Deposit Insurance Corporation (FDIC), so depositors were not affected by the failures. The failures of Silicon Valley Bank and Signature Bank are a reminder of the risks that banks face in today’s economy. Banks need to be prepared for a variety of challenges, including economic downturns, natural disasters, and cyber-attacks.
Here are some steps you can take to navigate these next few weeks in the face of potentially more bank failures:
What Can Business Leaders Do?
Stay Informed
The first and most important step is to stay informed about the latest developments in the financial sector. Keep an eye on the news, follow industry experts, and stay up to date with the latest trends and insights. Do not let anything take you by complete surprise. By staying informed, you can make informed decisions and take action quickly if needed. Staying informed is a surefire way to remain resilient in uncertain times like the present.
Diversify Your Banking Relationships
To reduce your exposure to any one bank, consider diversifying your banking relationships. Relying too heavily on just one banking provider poses a significant threat to the stability and security of your business. Instead of relying on one bank for all your financial needs, consider spreading your accounts across multiple institutions. This will help ensure that your business is not overly dependent on any one bank, and you have access to multiple sources of funding if needed.
Review Your Banking Relationships
Now is a good time to review your banking relationships and ensure that you are getting the best possible deal. Shopping around for banking options can have several benefits. You may be able to find better interest rates, lower fees, or more favorable terms by comparing different lenders. If you have been with the same bank for a long time, you may be able to negotiate better rates or terms by shopping around and exploring other options.
Evaluate Your Credit
Banks are becoming increasingly cautious about extending credit, so it’s essential to evaluate your creditworthiness and ensure that your business is in good financial standing. If you have any outstanding debts or unpaid invoices, it’s a good idea to address them as soon as possible to improve your credit score and increase your chances of securing credit in the future.
Consider Alternative Sources of Funding
If you are concerned about the potential for bank failures, you may want to explore alternative sources of funding. In essence, alternative funding refers to securing financial resources for your business from sources beyond the conventional bank loan. With a plethora of online options available, this avenue could be worth exploring if you’ve faced loan rejections previously, suffer from low credit scores, or are uncertain about the quantum of capital your business requires. This could include venture capital, private equity, crowdfunding, or other forms of financing that do not rely on traditional banks.
Prepare for the Worst
While it’s impossible to predict the future, it’s always a good idea to prepare for the worst-case scenario. Consider developing a contingency plan that outlines what you will do if your bank fails or if credit becomes unavailable. This could include tapping into emergency funds, exploring alternative financing options, or downsizing your business temporarily.
Stay Strong
While the potential for bank failures may be concerning, there are steps you can take as a business leader to navigate these uncertain times. By staying informed, diversifying your banking relationships, reviewing your banking relationships, evaluating your credit, considering alternative sources of funding, and preparing for the worst, you can help ensure that your business is well-positioned to weather any storm that may come your way.
