Brex Is Helping Startups Borrow More Than $1 Billion To Meet SVB Payroll Crunch

CEO Henrik Dubugras explains forbes That loan applicant has more than $10 billion in agreements with SVB – and believes his fintech startup could benefit from helping.

---

As companies lay their money with Silicon Valley banks to find a payroll solution for the coming week, Brex CEO Henrik Dubugras was on the phone over the weekend to find a way into the lending business — at least temporarily. – 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 credit line it announced on Friday.

Dubgrus told in an interview forbes that Breaux was still in the process of securing lenders and setting terms with them on rates, but planned to do so by the end of the weekend. “We are here 24/7, agreeing terms and raising money from lenders so we can start funding on Monday,” he said.

Dubugras said Breaux’s move into lending, historically a corporate credit card and expense management business, is temporary for now, with an initial focus on helping companies make payroll over the next week — keeping money in SVB accounts. Top concern for companies with “We view this as a very unique moment in time that we are uniquely positioned to help because many of these lenders, despite having the capital, do not have the capacity to service thousands of loans,” he said. Said.

Dubugras said the SVB has a total of $10 billion in contracts based on applications from companies that have applied for more than $1 billion in payroll loans to date. that number is different from the billions that were customers informed of Have shifted to Brax on Thursday. SVB’s accounts were suddenly frozen on Friday after the bank was closed and transferred to receivership under the Federal Insurance Deposit Corporation, leaving the venture capital and startup ecosystem scrambling.

Dubugras declined to comment on the exact amount transferred, and said Breaux did not know how much money on Friday the startups had attempted to transfer but were pending or frozen. However, a source with knowledge of the successful transfer told forbes Their amount was about $ 2 billion.

Well-known and deeply involved with the tech industry, the collapse of SVB means that some startups lack the means to pay employees as scheduled, and in some cases, previously scheduled employees may not be paid. Can (Posted by Parker Conrad, CEO of Processor Ripple) tweet thread about the status of affected customers on Friday.) The bank was also used by a number of non-tech businesses, including schools Even more wineryWhich means its upcoming payroll issues move forward in several areas.

In addition to Brax’s efforts, some venture capital firms have told the founders they plan to help make payroll payments; Others were working through the weekend to secure debt resolution in addition to the brakes. “Breaks’ emergency line is a popular option now,” said one venture capitalist who asked to remain anonymous because they were not authorized to speak to the press. forbes on Saturday. “VC firms considering floating [the money] Individually or as a firm,” among other possible solutions, the investor added. Other companies raising additional capital on convertible notes and trading equity for dollars are getting through this moment, the investor said. (And many startups that have funds in other banks or accounts have taken no action.)

Dubgras said such efforts are overdue. “Everyone is trying to figure it out on the go. If VCs are lending money then we are really happy, God bless them,” he said. VC firms can also help break the aggregate demand, he added. That said, a “more diverse group” of loan applicants may be able to secure better rates with lenders.

Not everyone, including the VC community, trusts Breaux at the moment. Some investors have urged startups to park their money primarily in the largest US banks, such as JPMorgan Chase, to reduce risk. asked by forbes Regarding his own financial health, Breaux stated that he had approximately $1 billion in cash. Because of the way Brex is structured, meanwhile — customers’ money is held in short-term treasuries and not loans or assets that must be held to maturity — the company returns all customers their money on the same day. There could be, Dubgras said, the risk of running a bank without collapsing the SVB. (Brex said it also doesn’t hold such long-term securities.)

“We’ve certainly seen some people move their money to the big banks,” Dubgrus said. “But we have more inflows than outflows. And we are not a bank.

Dubugras said BRICS did not yet know what its limit would be on participation in the credit line, but said the $1 billion already pending is far from its limit. Interested startups, especially those who need funding by Monday or Tuesday, should apply over the weekend, he said, especially if they don’t already have a Breaux account.

Dubgrus said that Breaux himself plans to make no profit from the facility of these loans. But do not make the mistake of considering such works as charity. Dubugras said the company expects customers who use its line of credit to continue for its other services. Broadly speaking, Brex needs the ecosystem for that core business to be stable. “For us, a lot of startups are losing payroll and going out of business, it’s terrible for our business,” he said. “So it’s great business for us to sort it out.”

As for what happens next with SVB: Dubugras said that based on his calls to the brakes so far, he expected the situation to be resolved. “If the only banks Americans can trust are the big four, that’s too bad for America. It’s very important to have healthy competition in our banking system,” he said. “Our hope is that the FDIC will come up with something tomorrow and at least release some money back to the companies this week.”