AUSTIN (KXAN) — The Federal government announced Sunday that customers of Silicon Valley Bank will have access to their money by Monday.
The bank serves more than half of the tech scene, but small business owners have their money tied up too. One of them is Austin-based premium wine start up company, BOXT.
Sarah Puil is the founder and CEO of the business.
“We are an ultra premium wine on tap,” Puil said. “Our headquarters is in Austin. Our winery is in Napa, and we actually have a winery in Texas.”
Puil said she was shocked when she heard the news of the banks collapse.
“It’s like, what do we need to do? How are we thinking about this?” Puil said.
What caused the collapse?
The bank’s downward spiral began late Wednesday when it surprised investors with news that it needed to raise over $2 billion to offset losses.
University of Texas assistant business professor Ben Bentzin said that that caused customers to withdraw their money.
“As soon as depositors start to think, ‘Well, man, my money might not be safe.’ They all pile in at once to take their money out, and that’s a bank run. That’s what happened to Silicon Valley Bank,” Bentzin said.
What is being done about it?
The Federal Deposit Insurance Corporation (FDIC), which insures money in banks, typically insures accounts up to $250,000. But many of the companies and people who used the bank, known for its relationships with technology startups and venture capital, had more than that amount in their accounts.
“The FDIC has the option to go beyond the insurance levels,” Bentzin said. “And if they decide to expand and cover all those depositors, then the deposit will be made whole.”
Sunday evening, the Federal Reserve Board released a joint statement with the Department of the Treasury and the FDIC about the situation.
“Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” according to the press release.
In her announcement today, Treasury Secretary Janet Yellen emphasized the federal government will not bail out Silicon Valley Bank.
How do businesses move ahead?
Still, Puil said she and other small businesses are left shaken up by what happened.
“A lot of entrepreneurs are looking at their companies and their teams and their capital, and saying, ‘What are we doing? How are we doing it? How else do we need to secure it?’ ” Puil said.
She said her plan is to continue selling as much wine as she can to continue growing her business.
“We’re going to raise a little bit more capital to cover what we had in debt so that we can keep moving forward,” Puil said. “This time next year, you know, our box is in everybody’s house. And we are like, ‘Wow, I remember that one time when a bank collapsed.’ “
This was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008.