Silicon Valley Bank (SVB) has officially been closed by the California Department of Financial Protection and Innovation. Any funds held with SVB are currently frozen until Monday, when the bank will reopen under FDIC management.
As a key supporter of top tech and healthcare startups nationwide, SVB’s receivership is set to have significant ripple effects throughout the business community.
What should founders know and do with their funds moving forward?
1. How does this affect founders’ day-to-day operations if SVB was their bank, and what steps should they take regarding any SVB loans or debt?
Founders should act quickly and reach out to the bank to get clarity on their situation and review their available options.
It’s also wise for founders to consider moving their funds to another bank as a precaution. By diversifying their banking partners, they can reduce the risk of losing access to all their funds if further disruptions occur.
Founders should review their loan agreements to fully understand their obligations. If they anticipate trouble meeting debt payments, they should contact their lenders right away to discuss possible solutions, such as restructuring the loan or seeking alternative sources of funding.
Additionally, founders should avoid keeping all their funds with a single bank. Spreading deposits across multiple institutions helps protect their assets if unexpected events impact one or more banks. In short, founders need to stay alert and take proactive steps to safeguard their business and finances in uncertain times.
The FDIC has published specific guidance for those directly affected by the receivership, which founders should review immediately.
According to the FDIC, “all insured depositors [with SVB accounts] will have full access to their insured deposits no later than Monday morning, March 13, 2023.” The agency will also provide uninsured depositors with an advance dividend within the next week, along with a receivership certificate for any remaining funds. As SVB’s assets are sold in the coming weeks, the FDIC may issue additional dividend payments to uninsured depositors.
2. What does this mean for Canadian businesses specifically?
As Betakit reported, while many Canadian startups used SVB for their U.S. banking needs, very few—if any—Canadian VC firms relied primarily on SVB, since the bank’s Canadian operations had not yet launched.
For Canadian founders with U.S. accounts at SVB, the advice is much the same as for their American peers: Contact the bank immediately to understand your options.
Canadian customers should also be aware of a potential “credit crunch” in Canada following SVB’s closure. Since SVB’s Canadian branch did not have a national banking license, its venture debt lending relied on deposits from outside Canada. With SVB’s exit, one important source of capital for Canadian startups is gone—something to keep in mind for future planning.
3. What are the best practices for short-term liquidity issues when moving funds? How should founders communicate with employees?
Contact the bank immediately: The first priority is to reach out to the bank to understand the situation and explore ways to access your funds. Acting quickly can help minimize any disruption to your operations.
Diversify your banking relationships: Spread your risk by keeping funds at more than one bank. This ensures you’ll still have access to cash if one institution faces unexpected issues.
Explore alternative funding sources: If you can’t access your funds, look into other options like lines of credit, factoring, or even crowdfunding to bridge the gap.
Communicate with your team: If liquidity issues could affect payroll, be open and transparent with employees. Explain the situation, reassure them you’re working on a solution, and provide a timeline for when you expect things to be resolved.
Prioritize critical expenses: If cash is tight, focus on the most essential expenses first—like payroll and rent—to keep your business running.
This situation is still developing, and more guidance from regulators and financial experts is expected in the coming days. Founders should stay informed and be ready to adjust their plans as new information becomes available.
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