On Sunday, the FDIC announced that Silicon Valley Bank (SVB) customers will have access to all their deposits—even those above the FDIC’s usual $250,000 insurance limit—starting Monday, 2023-03-13.
This comes as the FDIC created two new bridge banks to support customers of both SVB and Signature Bank. The latter was closed and placed into FDIC receivership on 2023-03-12, to address what the government called “a systemic risk” to the U.S. banking system.
We’ll cover the Signature Bank situation separately, but for SVB customers and tech startups in general, there are key steps to take as the situation continues to evolve.
What options do SVB and Signature Bank customers have now?
For many business owners affected by the bank closures, the top concern was making payroll. When SVB went into receivership, its assets were effectively frozen on Friday, and the FDIC had until Monday at 9:30 a.m. ET to advise customers on next steps.
Fortunately, the FDIC acted quickly on Sunday, assuring bank customers that the government will guarantee all deposits. This won’t cost taxpayers anything, as the funds will come from the FDIC’s Deposit Insurance Fund (DIF), which currently holds over $100 billion.
The FDIC also took extra steps to calm fears of a broader market collapse by offering additional funding to other banks that might be affected as former SVB clients look for new banking partners.
What does this mean for founders?
The main takeaway for founders directly impacted is that while your teams will have access to all funds previously held at SVB and Signature before receivership, the exact timing for releasing those funds is still uncertain.
While the FDIC is working hard to share updates quickly, there are still many unknowns, including which firms will eventually buy each bank’s remaining assets and what that will mean for customers.
Founders can’t afford to wait for more guidance and may need to use short-term liquidity solutions to keep their businesses running during this period of uncertainty.
Short-term cash flow resources
If you’re an SVB customer still worried about accessing payroll funds, there are additional short- and long-term options available.
- Capchase is offering emergency payroll financing specifically for startups affected by the SVB closure. Companies can access 20% to 30% of their deposits in financing with a 30-60 day short-term liquidity product. To qualify, customers impacted must fill out this form. If any questions, you can reach out to Capchase directly [email protected].
- Swoop is ready to help Boast clients with any U.S. government receivables, including R&D tax credits. This covers short-term financing, cash flow-based solutions, or any type of asset-based financing. Book a meeting with Swoop’s Senior Funding Manager, Bhyran Sathyananthan to discuss your options and strategies.
What should Canadian founders know and do now?
As we shared in our previous coverage of the SVB events, SVB didn’t have a formal banking operation in Canada before entering FDIC receivership. Still, many Canadian companies held U.S. accounts with SVB, and those account holders should make sure to do the following:
- Contact your bank right away: Find out where your funds are and how soon you can move them out of affected accounts.
- Diversify your banking relationships: Use more than one financial institution, both in Canada and abroad, to avoid having all your assets frozen at once.
- Look for alternative funding sources: Lines of credit, factoring, or even crowdfunding can help your team access capital if accounts are frozen.
- Communicate with your employees: If banking issues could affect payroll or cash flow, let your team know as soon as possible to reduce panic and limit further disruption.
What about Sweep accounts?
There’s some good news for SVB customers who used Sweep accounts, since these deposits are moved into external investment accounts. Typically, a third party automatically transfers amounts above or below a set threshold into a higher-interest investment option at the end of each business day (like a money market fund).
By design, these funds are transferred to a third party, so they don’t appear on SVB’s balance sheet. However, according to the latest FDIC update, it’s still unclear when SVB customers will be able to fully withdraw these funds—just like other assets currently held at SVB.
Now, about the Signature Bank closure…
While SVB was a major supporter of tech startups for nearly 40 years, Signature Bank played a similar role in the cryptocurrency and blockchain space, earning a reputation as one of Wall Street’s most crypto-friendly lenders over the past five years.
Last year, Signature’s leadership announced the bank would move billions of dollars in crypto-related deposits off its books as the broader market cooled on blockchain. As of December 2022, the bank had about $110 billion in total assets and $83 billion in total deposits.
Like SVB, Signature Bank customers will also have full access to their funds at and above the $250,000 FDIC insurance limit. The U.S. government hopes this will help prevent a wider banking crisis as markets open for the week.
What does President Biden have to say?
While it was a stressful weekend for those directly affected by the bank closures, the government moved quickly to provide reassurance and prevent further panic in the markets.
“Over the weekend, under my direction, the Treasury Secretary and my National Economic Council Director worked closely with banking regulators to address the issues at Silicon Valley Bank and Signature Bank,” said U.S. President Joseph Biden in a statement on Sunday. “I’m pleased they found a quick solution that protects American workers and small businesses, and keeps our financial system secure. This solution also ensures that taxpayer dollars are not at risk.”
“The American people and American businesses can be confident that their bank deposits will be there when they need them,” the president added. “I am fully committed to holding those responsible for this situation accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so we don’t end up here again.”
This story will continue to develop, but rest assured the Boast team is staying on top of the news and is here to help customers navigate the uncertainty. Check out our recent FAQ for what founders can do now as the situation evolves.
