Fintechs, neobanks rally to extend credit to startups impacted by SVB crisis

Fintechs, neobanks rally to extend credit to startups impacted by SVB crisis

As Indian startups brace for ways to meet liquidity demands after California regulators shut down Silicon Valley Bank (SVB), ecosystem partners—revenue financing entities, as well as organisations like AngelList—have rallied around to help these companies. 

The SVB shutdown has largely impacted Indian startups with US entities or headquarters, including multiple businesses in the Software-as-a-Service (SaaS) space and those who have been a part of the startup accelerator programme, Y Combinator. 

Neobank Razorpay, revenue financing startups like GetVantage , Kluband Recur Club and cross-border payments solution provider Salt.Pe have jumped in to offer solutions to startups which need help with a line of credit to manage expenses. 

Several VCs have also stepped in to ensure their portfolio startups keep operating in the aftermath of the shut down.

On Saturday, AngelList launched its Lifeline Agreement and Bank Account product to help startups in need of emergency capital after SVB shut down.

The platform offers temporary loans from investors in the form of promissory notes with a standard interest rate of 7%, apart from a built-in neobanking solution with Blue Ridge to create a new account, so that funds can be transferred out of SVB once the bank opens on Monday.

A report by Bloomberg said that Khosla Ventures sent an email to founders saying that the venture capital firm would step in and cover payroll for some of its portfolio companies if they had shortfalls because of funds tied up with Silicon Valley Bank. 

The Federal Deposit Insurance Corporation (FDIC), which is now the receiver, has allowed account holders to withdraw up to $250,000 from SVB, subject to account balance. 

“Over the last two days, we have received interest from more than 100 startups for payroll financing and managing short-term expenses. This is compounded by the fact that it is the end of the financial year for Indian businesses,” Eklavya Gupta, Co-founder of Recur Club, told YourStory

He added that the company had set aside a corpus of $15 million to help out businesses impacted by the crisis and has done away with the 1-3% transaction fee. The revenue financing company has a large number of SaaS startup customers and works with companies which typically have annual revenue of at least $100,000 from existing customers. 

The platform will continue to charge a discount of 8-12% on revenue, with a payment cycle of 12 months. The company is also partnering with banks to help startups open dollar accounts at GIFT City within a period of 48 hours.

Recur Club estimates that over 1,000 startups have been directly affected by the SVB crisis.

Revenue financing company GetVantage too has partnered with banks to offer GIFT City accounts to startups, apart from offering working capital loans of up to $250,000 within a period of 24 hours, depending on the underwriting process. 

“We have waived off our platform fee and a lot of venture capital funds have directed their portfolio companies to us. We are offering them short-term working capital loans for up to 10 months at the standard lending rate of 15%,” Karun Arya, Chief Growth Officer at GetVantage, told YourStory. 

Revenue financing platform Klub, too, is offering emergency financing of up to $400,000 for working capital, inventory financing and payroll requirements for startups. “Whether startups require short-term working capital loans or credit lines, we are here to assist them in the best way possible. We’re offering tenures starting 30 days up to 12 months with flexible repayments for affected startups,” said a statement issued by the company.

Razorpay too has announced issuing working capital loans of up to $120,000 for new borrowers and $250,000 credit line for existing RazorpayX businesses. 

(This story was updated with additional inputs.)

Edited by Saheli Sen Gupta

This content was originally published here.