When your company is planning a major purchase or investment, there is often a discussion surrounding risk. A logical step to mitigate this risk is to secure an escrow agent that can provide peace of mind for all parties involved, but where do you start?
As you begin your search for an escrow agent, it is first important to know that all are not created equal. The level of protection and service you receive varies widely based on the agent you choose. So, begin your search by understanding the purposes of escrow and the options you have for securing protection.
Why do businesses need escrow accounts?
Most people are familiar with the concept of escrow as it’s integral in the home buying process, but fewer have experienced the need for business escrow. This need arises when companies enter an especially large or lengthy transaction.
Large transactions that typically require an escrow agent include:
In addition to large transactions like the ones above, deals of any size that take a long time to complete can benefit from escrow. For example, the product being delivered could be highly customized and require significant investment by the manufacturer to deliver, or the deal could have regulatory hurdles that might take years to surpass. In any event, businesses need assurance when entering into a lengthy deal that the other party will hold up their end of the bargain.
The most common way to ensure both parties have peace of mind in a large or lengthy transaction is to secure the funds necessary for the deal with a 3rd party – the escrow agent. Once the deal occurs as agreed, the escrow agent releases the funds to the seller. On the other hand, if problems arise during the transaction, the agent returns the money to the buyer according to the terms of the contract.
How do you select an escrow provider for your business transaction?
It doesn’t matter whether this is your first time selecting an escrow provider for your business, or if you’re very experienced with escrow. It’s always smart to evaluate (or re-evaluate) your options when selecting a service provider for your next deal.
You may think all escrow providers are basically the same – they hold your money until it’s needed, for a fee – but this assumption is false. There are two main areas where escrow agents differ: the level of safety they offer, and the level of customer service they provide.
In the past, the most common way to achieve safety for escrow funds was to select an agent with a great reputation and a long history in business. Those times have changed with the emergence of new financial technology – a.k.a. fintech.
Fintech has changed escrow services, in a good way.
With the advent of fintech, many financial service providers are getting smarter, and that benefits you. When applied to escrow services, fintech can create advantages that were only dreams just a few years ago. The most advanced escrow providers will leverage a network of banks to provide the highest level of safety for escrow funds.
By leveraging fintech, certain escrow providers can guarantee the safety of your funds by obtaining FDIC insurance on your entire balance. If you’re familiar with FDIC insurance, you know that the limits are incredibly low compared to the size of most business deals that need escrow. It’s true that the FDIC limit of $250,000 at each institution per account ownership category also applies to all eligible escrow funds held in a member bank. Fortunately, our company has developed technology that provides access to extended government protection.
How to open an escrow account for business? Contact ADM.
At the American Deposit Management Co. [ADM], our fintech takes escrow services to the next level. Our proprietary network of financial institutions allows us to provide access to full FDIC or NCUA insurance for escrow funds, with a single deposit and a single monthly statement.
All you need to open an escrow account is a quick call to the ADM office or a visit to our business escrow services page. One of our talented specialists will help you establish an account and make your deposit. That’s all it takes to ensure business cash is safe!
Contact us to get started today. Or continue your research into business escrow services by browsing our latest articles.
*American Deposit Management Co. is not an FDIC/NCUA-insured institution. FDIC/NCUA deposit coverage only protects against the failure of an FDIC/NCUA-insured depository institution.