Personal Finance

Silicon Valley Bank collapse made businesses rethink banking habits

Many small business owners are wondering how to handle their money in the wake of recent bank failures.

Silicon Valley Bank collapse made businesses rethink banking habits

The effects of the failures of Silicon Valley Bank and Signature Bank extend far beyond Wall Street, reaching to small business owners across the country.

Alex Kline owns a production company in Arizona. A firm he uses to process his payroll has been impacted by SVB's collapse.

"Luckily I didn't have anyone that needed to be paid that day, but it would have not been great if I did," Kline said.

Robert McDonald of Taft's Cincinnati Business and Finance Group has at least 20 clients with money in SVB.

"It was a very scary and traumatic weekend," McDonald said. "It was one of those times when you question the very fundamentals of the market."

"What we recommend to our clients is that you diversify your deposits in separate banks," said Carl Gould, a business analyst. "For example, open up an account at another bank, and put your payroll money in there. Open up a third account, and put your tax funds in there."

John Reese owns Hot Pie Pizza in West Palm Beach, Florida, and he banks locally. He trusts government regulations to protect him, but he's still anxious.

"A little bit fearful, uncertainty is what makes me very, very nervous," Reese said.

The Federal Reserve's battle against inflation factors into that uncertainty.

"When interest rates go up, when inflation goes up, it does put extra stress on banks, so I do think we are going to see some other isolated bank failures," Gould said.

Federal officials are scheduled to meet next week and are expected to raise rates by 25 basis points.

A Silicon Valley Bank sign is shown at the company's office in Santa Clara, Calif.

What is a bank run, and how did Silicon Valley Bank fail?

Last week, Silicon Valley Bank failed, leaving customers in a tough spot as the government took over.