The FDIC announced on Sunday that Silicon Valley Bank (SVB) customers will have access to all of their deposits—even those above the FDIC’s standard $250,000 insurance limit—starting Monday, March 13.
This update comes as the FDIC set up two new bridge banks to support customers of both SVB and Signature Bank. Signature Bank was shuttered and taken into FDIC receivership on Sunday, March 12, in response to what the government called “a systemic risk” to the U.S. banking system.
We’ll cover the Signature Bank situation separately, but there are some key steps SVB customers—and tech startups in general—should consider as this situation continues to unfold.
What options are available now for SVB and Signature Bank customers?
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 faced a Monday, 9:30 AM ET deadline to provide customers with next steps.
The good news: On Sunday, the FDIC quickly provided guidance, assuring bank customers that the government will backstop all depositors. This support won’t cost taxpayers anything, since the funds will come from the FDIC’s Deposit Insurance Fund (DIF), which currently holds over $100 billion.
To further calm fears of a broader market crisis, the FDIC also offered additional funding to other banks that might be affected as former SVB customers look for new banking partners.
What does this mean for founders?
The main takeaway for founders directly impacted is that teams will have access to all their funds that were held at SVB and Signature before receivership, but the exact timing for releasing those funds is still uncertain.
While the FDIC is working hard to share updates as quickly as possible, there are still many unknowns—like which firms will ultimately buy each bank’s remaining assets and what that will mean for customers.
Founders can’t afford to wait for all the answers and may need to seek 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 worried about accessing payroll funds, there are additional options for both short- and long-term needs.
- 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 available to support Boast clients with any U.S. government receivable as well, including R&D tax credits. This includes any short-term financing, cash flow-based financing or any type of asset-based financing. Book time with Swoop’s Senior Funding Manager Bhyran Sathyananthan to discuss options and strategies.
What should Canadian founders know and do next?
As we shared in our previous coverage on the SVB events, the bank didn’t have a formal Canadian banking operation before entering FDIC receivership. Still, many Canadian businesses held U.S. accounts with SVB. If that’s you, here’s what you should do:
- Contact the 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 bank, 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 impact payroll or cash flow, let your team know as soon as possible to reduce panic and prevent further complications.
What about Sweep accounts?
There’s some good news for SVB customers who used Sweep accounts, since these deposits are transferred to external investment accounts. Typically, in these cases, a third party automatically moves amounts above or below a set threshold into a higher-yield investment option at the end of each business day (like a money market fund).
By design, Sweep account funds are transferred to a third party, so they don’t appear on SVB’s balance sheet. However, according to the latest FDIC updates, it’s still unclear when SVB customers will be able to fully access and withdraw these funds—just like other assets currently tied up at SVB.
Now, about the Signature Bank closure…
While SVB was a major backer of tech startups for nearly 40 years, Signature Bank had a similar reputation in the cryptocurrency and blockchain space, known as one of Wall Street’s most crypto-friendly lenders over the past five years.
Last year, Signature Bank’s leadership announced plans to move billions in deposits out of the crypto sector as market sentiment toward blockchain cooled. As of December 2022, the bank reported total assets of about $110 billion and total deposits of roughly $83 billion.
Like SVB, Signature Bank customers will also have full access to their funds—even above the $250,000 FDIC insurance limit. The U.S. government hopes this move will prevent a broader banking crisis as markets open for the week.
What has President Biden said?
Although the weekend was stressful for those directly impacted by the bank closures, the government acted quickly to provide reassurance and prevent further market panic.
“Over the weekend, at 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,” President Joseph Biden said in a statement Sunday. “I’m pleased they reached a quick solution that protects American workers and small businesses, and keeps our financial system secure. This solution also ensures taxpayer dollars are not at risk.”
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” the president added. “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
This story is still developing, but the Boast team is monitoring the situation closely and is here to help customers navigate any uncertainty. Check out our recent FAQ for founders to see what steps you can take as things continue to change.
