NJ offers assistance package for entrepreneurs hit by SVB collapse

“Concerned but not panicked,” Gov. Phil Murphy responded to a question from CBS News’ Margaret Brennan about the collapse of Silicon Valley Bank (SVB) during a Sunday morning appearance on “Face the Nation.”

The stunning, sudden meltdown, two days earlier on March 10, followed a run on the institution as depositors raced to get their money out—leaving it essentially insolvent. The governor said that the state is monitoring the situation to determine how New Jersey is affected.

That especially pertains to the innovation and startup sectors, since SVB has worked closely with venture capital-backed startups, even dubbing itself “the financial partner of the innovation economy.”

“Depositors and workers in the companies whose deposits are in that bank need to be job No. 1,” Murphy continued. “We’ve got a big innovation economy in New Jersey. So, we’ve spent the weekend trying to make sure we’re out ahead of this. We don’t have a whole lot of exposure to SVB, per se. But we do have a lot of tech companies. So, our Economic Development Authority (NJEDA) is preparing a package largely focused on liquidity to be there in case we need to be there.”

Just hours after that “Face the Nation” appearance, the governor and the NJEDA announced that support package for New Jersey entrepreneurs and companies affected by the SVB crisis.

The assistance includes:

• The re-opening of the NJEDA’s Entrepreneur Support Program, a $5 million initiative that offers a guarantee to support repayment of an investor loan advanced for working capital purposes and designed to encourage investors to support businesses within their portfolios during this liquidity crisis. It provides an NJEDA guarantee of up to 80% for an eligible new loan or convertible note by a qualified investor into a New Jersey qualified business, not to exceed a $200,000 guarantee per company.
• The launch of the Angel Match Program, a $20 million program to help early-stage businesses bridge funding gaps as they scale operations and refine products. The program matches up to $500,000 in direct investments and is designed to fuel the growth of early-stage companies. The funding can be used for product development, marketing, research and development, and other working capital needs.
• Scheduling a special board meeting to consider the creation of a $10 million emergency liquidity facility that will review financial support requests for New Jersey-based companies with more than $250,000 in deposits at SVB. It would support impacted companies with a loan of up to $500,000 to provide short-term financing options for at most 12 months. The NJEDA says that meeting will be scheduled in the coming week with further details to come.

“All programs will provide necessary financial support for companies experiencing liquidity challenges due to the SVB collapse and are designed to help companies meet payroll, pay rent, and continue their day-to-day operations,” the NJEDA said in a press release. “Both programs will open on the NJEDA’s website early this week, with Angel Match launching on Monday, March 13th with pre-qualifications opening at 9:00 a.m., and the Entrepreneur Support Program launching on Wednesday, March 15th.”

“Now, more than ever, it is essential that our state supports companies that contribute to our economy, innovation ecosystem, and the dynamism of our cities,” said Murphy in a statement. “By offering a suite of programs for New Jersey entrepreneurs impacted by the SVB collapse, we will continue to keep residents employed and support companies that are vital to our innovation ecosystem.”

“Today’s announcement serves as a testament to New Jersey’s commitment to the success of our entrepreneurial sector, with the state pivoting almost overnight to launch programs that provide critically necessary support for entrepreneurs during times of economic uncertainty,” said NJEDA CEO Tim Sullivan.

“During this challenging time, we remain committed to ensuring that investment dollars continue to flow into New Jersey’s emerging technology and life sciences companies,” said NJEDA Chief Economic Transformation Officer Kathleen Coviello. “Entrepreneurial businesses are critical to our state’s overall economy. The suite of programs announced today will connect them with the working capital they need to keep their operations running and will keep our innovation economy moving forward.”

Being proactive

TechUnited and the NJEDA have also partnered to determine ways to help the Garden State tech community, especially given the uncertainty of what will play out moving forward. The effort includes a survey that was pushed out on social media to determine just how many New Jersey startups and VCs were affected and exposed.

“NJ startups/VCs impacted by SVB issues: we are working w/@APstartup [Aaron Price, TechUnited president and CEO] @WeAreTechUnited to get a forum together asap to identify any critical issues and how we might be able to help,” NJEDA CEO Tim Sullivan tweeted on Friday. “Stay tuned. @GovMurphy and our team are committed to our entrepreneurial sector.”

Sunday’s announcement was applauded by the New Jersey Chamber of Commerce.

“New Jersey is home to many startups and technology companies that need support as a result of what happened last week. The New Jersey Chamber of Commerce applauds Gov. Murphy and the NJEDA, as well as other stakeholders, for acting quickly in the past 48 hours to create programs that will serve as lifelines to these businesses during challenging days,” Tom Bracken, president and CEO, New Jersey Chamber of Commerce, told NJBIZ in a statement. “These actions will ensure New Jersey remains the innovation state with an economy focused on future jobs and industries.”

During that “Face the Nation” appearance, Murphy reiterated that there is concern about the potential fallout.

“As you have to be when you have a bank of this size go down,” said Murphy. “But I don’t think there’s any need to panic. And I’m certain that the authorities at the federal level are working feverishly to come up with some sort of solution sooner than later.”

An announcement from federal officials did indeed come sooner rather than later. Shortly after the governor’s announcement, Treasury Secretary Janet Yellen, Federal Board Reserve Chair Jerome Powell and Federal Deposit Insurance Corp. Chairman Martin Gruenberg announced a series of actions Sunday evening, including enabling the FDIC to complete its resolution of Silicon Valley Bank and the creation of a new Bank Term Funding Program (BTFP) that will provide one-year loans to address liquidity pressures for banks, with up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP.

“Depositors will have access to all of their money starting Monday, March 13,” Yellen, Powell and Gruenberg said in a joint statement. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

‘Clearly a concern’

The Friday run on SBV prompted the California Department of Financial Protection and Innovation to intervene and close the bank, which then tapped the FDIC to help protect depositors.

The FDIC created the Deposit Insurance National Bank of Santa Clara (DINB) to help facilitate those efforts.

The FDIC protects up to $250,000 of customer deposits. However, many SVB customers, including tech businesses and wealthy individuals, had much more than that in their accounts, which was part of what has caused so much anxiety.

SVB is the 16th largest bank in the country and had approximately $209 billion in total assets and about $175.4 billion in deposits at the end of 2022.

Before the Sunday evening announcement, Yellen also appeared on “Face the Nation.”

“Whenever a bank, especially one like Silicon Valley Bank with billions of dollars in deposits fails, it’s clearly a concern,” said Yellen during the appearance. “From a standpoint of depositors, many of which may be small businesses, they rely on access to their funds, to be able to pay the bills that they have, and they employ tens of thousands of people across the country. We’ve been hearing from those depositors and other concerned people this weekend. So let me say that I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation.”

Yellen was asked if she believes anything similar could happen at other regional banks around the country.

“Let me just say that we want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” Yellen explained, adding that the goal is always to use supervision and regulation to avoid contagion.

Brennan also asked the Treasury secretary whether a government bailout was at all possible.

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking,” said Yellen. “And the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.”