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Overview
The collapse of Silicon Valley Bank and now First Republic Bank was an unfortunate wake-up call to how important it is for founders to know their cash positions and cash risks at all times. Managing cash is more complicated and risky than many of us realized. At Puzzle, we get that, and we want every founder to have confidence in understanding all their cash, from everywhere, all at once.
Many startups are responding to the SVB collapse by spreading their funds across multiple institutions to ensure FDIC coverage in case of future collapses.
One common misconception is that there is $250k coverage for each bank account. We’ve read the fine print and are here to tell you that’s not true. FDIC coverage is limited to $250k per depositor per category per institution. Say you have a checking account, savings account, and money market deposit account. These accounts would be pooled together in one category and insured up to $250K in aggregate.
We recommend all startups review the FDIC’s excellent FAQ about how FDIC insurance works.
The main benefit of spreading your cash between banks is protecting your cash against risk, but doing so also makes it harder to track all your cash, in a single view, in real-time. Puzzle now makes it easy to see your total cash and total FDIC coverage in a single snapshot across different banks.
Innovative solutions to increase your FDIC coverage
If you’re not interested in holding your cash in 50 different bank accounts (like Giannis Antetokounmpo), don’t worry. To enhance your coverage at a single bank, you can follow some strategic methods. Here are two options you should consider:
Mercury Vault
Maximum Coverage: Up to $5M
Mercury is a financial technology company that works with over 100,000 venture-backed and bootstrapped startups. Mercury recently launched Mercury Vault, a new risk-management solution that provides suggestions on how startups can allocate their cash to mitigate risks and protect their funds. Through its two partner FDIC-insured banks (Evolve Bank & Trust and Choice Financial Group) and sweep networks, your deposits are spread across up to 12 different banks that are managed through one single account in Mercury. This solution can provide up to $5 million in FDIC insurance.
Brex
Maximum Coverage: Up to $6M
Brex offers a suite of financial products to over 20,000 startups and enterprises. In addition to offering spend management tools and credit cards, Brex also offers banking solutions, like the Brex business account. The Brex business account is a cash management account (not a bank account) that operates like a business bank account. It allows you to store deposits at a Brex partner bank (up to 9 of them!) or in a government money market mutual, which can make you eligible for FDIC insurance of up to $6 million in total.
Puzzle’s real-time cash and FDIC coverage monitor
How can you continue to ensure your ongoing protection keeps pace as you grow?Puzzle has built two free tools for monitoring your FDIC coverage:
- Today’s Cash View: A single snapshot of your total cash balance, whether it is across 1 or 20 bank accounts
- FDIC Coverage Monitor*: A real-time unified view of your estimated FDIC protection, highlighting what portion of your cash is likely to be protected by FDIC coverage (or not)
The FDIC Coverage Monitor is a quick way for Puzzle users to access and view their estimated FDIC coverage at any time.
Say goodbye to manually keeping track of all your bank balances and coverage in a spreadsheet. In Puzzle, depository balances less than $250k at a bank are tagged as “Covered,” while depository balances greater than $250k are tagged “At risk.”
Investment accounts — such as Treasury and Brokerage accounts — are tagged “Not eligible” for FDIC coverage.
While many accounts not offering FDIC coverage are still great options offering high yield without extreme risk, we want you to make informed decisions based on your current coverage and risk tolerance. And we are equipped to do this for you!
*Puzzle’s estimate is for informational purposes only. Confirm all FDIC coverage with the applicable financial institution and the FDIC website.
How to calculate your FDIC coverage
While Puzzle is able to estimate your FDIC coverage based on its $250k coverage for depository accounts at each bank, FDIC offers its own FDIC coverage calculator that enables you to review FDIC coverage for each bank you use. You can also review the depository insurance FAQs on the FDIC website to make sure you are making an informed decision about moving your money between accounts.
Mercury provides users with a view of current FDIC coverage. To see which banks your money is allocated to, you can select “Docs & Statements” and download your Sweep statement.
Within a Brex account, you can choose a custom allocation between FDIC-insured cash and money market funds (not FDIC-insured) within Settings → Company → Allocation → Manage. This method allows you to allocate current funds and set up rules for where to allocate future funds.
Conclusion
As your financial situation shifts and you allocate assets between multiple bank accounts, having a single view of your cash is important. A single snapshot allows you to:
- Access a unified view of your cash, including which cash is available vs. committed to paying credit cards or payroll
- Understand the composition of your spending and burn for budgeting and runway management
- Identify discrepancies and make sure that all of your accounts are up to date
- Decrease your risk and quickly compare your accounts to make sure that you are appropriately allocating your account balances based on FDIC protection and interest rates
Puzzle simplifies the process of gaining cash insights that help you make better business decisions. Pulling together a real-time cash analysis — including FDIC coverage — can be a time-consuming, tedious, and challenging task. Make your finance and accounting automated, easy, and intuitive.
For more information about FDIC coverage, refer to the FDIC coverage calculator, depository insurance FAQs, and the most recent FDIC news.
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