Brex helps startups borrow over $1 billion to respond to payroll crisis SVB

CEO Henrique Dubugras recounts Forbes that loan seekers have more than $10 billion tied to SVB — and thinks his fintech startup can benefit from his help.

As companies that have kept their money with Silicon Valley Bank race to find payroll solutions for the coming week, Brex CEO Henrique Dubugras was spending the weekend working on the phone to get into the business. lending industry – at least temporarily – to try to help.

The San Francisco-based fintech unicorn announced on Saturday that it has already received more than $1 billion in requests for the emergency line of credit announced on Friday.

In an interview, Dubugras said Forbes that Brex was still in the process of finding lenders and setting terms with them on rates, but expected to do so by the end of the weekend. “We’re here 24/7, agreeing terms and collecting money from lenders so we can start funding on Monday,” he said.

Historically a credit card and expense management business, Brex’s shift to lending is temporary for now, Dubugras added, with an initial goal of helping businesses make payroll next week – the main concern companies that keep money in SVB accounts. “We see this as a very unique moment in time that we are uniquely positioned to help because many of these lenders, even if they have the capital, don’t have the capacity to operationalize thousands of loans,” he said. he declared.

Companies that have applied for more than $1 billion in payday loans so far have about $10 billion in total tied up with SVB based on their applications, Dubugras said. This number is separate from the billions that customers would have transferred to Brex on Thursday. SVB’s accounts were abruptly frozen on Friday when the bank was closed and placed in receivership under the Federal Insurance Deposit Corporation, leaving the venture capital and startup ecosystem struggling.

Dubugras declined to comment on the exact amount that was transferred, and said Brex could not tell how much money the startups attempted to transfer on Friday but remained pending or frozen. A source with knowledge of the successful transfers, however, said Forbes they amounted to about $2 billion.

Well known and deeply connected to the tech industry, the collapse of SVB means that some startups suddenly cannot afford to pay employees as planned and in some cases already scheduled staff payments may not be made. . (Parker Conrad, CEO of processor Rippling, posted a tweet thread Friday on the situation of affected customers.) The bank has also been used by a range of non-tech companies, including schools and even wineries, which means the resulting payroll issues extend beyond a number of industries.

In addition to Brex’s efforts, some venture capitalists have told founders they plan to help with payroll payments; others were working over the weekend to secure loan solutions in addition to Brex. “The Brex emergency line is a popular option now,” said a venture capitalist who asked to remain anonymous because he was not authorized to speak to the press. Forbes SATURDAY. “Venture Capital Firms Consider Floating [the money] personally or as a business,” among other potential solutions, the investor added. Other companies are raising additional capital on convertible notes and trading stocks for dollars to get through this moment, the investor said. (And many startups with funds in other banks or accounts have taken no action.)

Such efforts, Dubugras noted, remain pending. “Everyone is sort of trying to figure this out on the go. We are really happy if the VCs lend money, God bless them,” he said. Venture capitalists could also help by aggregating demand for Brex, he added, as a “more diverse group” of loan seekers could get better rates from lenders.

Not everyone, including the VC community, trusts Brex right now. Some investors have urged startups to place their money primarily with the biggest US banks, such as JPMorgan Chase, to minimize risk. Ask by Forbes about his own financial health, Brex said he had close to $1 billion in cash. The way Brex is structured, meanwhile – with customer money kept in short-term, unloaned treasuries or assets that must be held to maturity – the company could return to all customers their money the same day, Dubugras said, without the risk of a bank run that would topple SVB. (Brex said he doesn’t hold such long-term securities either.)

“We’ve seen a few people move their money to the big banks, that’s for sure,” Dubugras said. “But we have a lot more entries than exits. And we are not a bank.

Dubugras said Brex doesn’t yet know what its limit on the line of credit will be, but said the $1 billion already pending is way off its cap. Interested startups, especially those that need money by Monday or Tuesday, should apply over the weekend, he added, especially if they don’t already have a Brex account.

Brex itself plans to make no profit from facilitating these loans, Dubugras said. But don’t confuse these actions with altruism. The company hopes customers who use its line of credit will stick around for its other services, Dubugras said. More broadly, Brex needs the ecosystem to remain stable for this core business. “For us, a lot of startups are missing payroll and going bankrupt, it’s terrible for our business,” he said. “So solving this problem is a very good deal for us.”

As for what happens next with SVB: Dubugras said based on Brex’s own calls so far, he hopes the situation will be resolved. “If the only banks Americans can trust are the big four, that’s extremely bad for America. Having healthy competition in our banking system is something super crucial,” he said. Our hope is that the FDIC releases something tomorrow and releases at least some of the money to businesses this week.”

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