Brex is helping startups borrow more than $1 billion to weather SVB payroll crisis

CEO Henrique Dubugras tells forbes that loan applicants have more than $10 billion tied up at SVB – and believes his fintech startup can benefit if he helps.

While companies that have been keeping their money at Silicon Valley Bank seek payroll solutions for the coming week, Brex CEO Henrique Dubugras spent the weekend working on the phone to get into the lending business — at least temporarily — to try , to help.

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

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

Previously a corporate credit card and spend management business, Brex’s entry into lending is temporary for now, Dubugras added, with an initial focus on helping companies with next week’s payroll — the biggest concern for companies raising money hold SVB accounts. “We just look at this as a very unique moment where we’re in a unique position to help because many of these lenders, while they have the capital, don’t have the capacity to operationalize thousands of loans,” he said .

Companies that have applied for over $1 billion in payroll loans to date have tied up about $10 billion in aggregate with SVB as a result of their applications, Dubugras said. That number is separate from the billions customers reportedly transferred to Brex on Thursday. Accounts at SVB were abruptly frozen on Friday as the bank was shut down and placed under the receivership of the Federal Insurance Deposit Corporation, rocking the venture capital and startup ecosystem.

Dubugras declined to comment on the exact amount that had been transferred, saying Brex had no way of knowing how much money startups tried to transfer on Friday but remained pending or frozen. However, a source with knowledge of the successful transfers said forbes they amounted to about 2 billion dollars.

Well known and deeply entwined with the tech industry, SVB’s collapse means some startups suddenly lacked the funds to pay employees as planned, and in some cases already planned staff payments may not go through. (Parker Conrad, the CEO of processor Rippling, published a tweet thread Friday on the situation for affected customers.) The bank has also been used by a number of non-tech companies, including schools and even wineries, meaning the resulting salary problems are spreading across a range of sectors.

In addition to Brex’s efforts, some venture capital firms have told the founders that they plan to help pay the payroll; others worked over the weekend to secure loan solutions alongside Brex. “The Brex emergency number is now a popular option,” said one venture capitalist who asked to remain anonymous because he was not authorized to speak to the press forbes on Saturday. “VC firms are considering floating [the money] personally or as a company,” the investor added, among other possible solutions. Other companies are raising additional capital for convertible bonds and trading shares for dollars to get through this moment, the investor said. (And many startups with funds in other banks or accounts have done nothing at all.)

Such efforts, Dubugras noted, are yet to come. “Everyone tries to find that out along the way. We are very happy when VCs lend the money, God bless them,” he said. VC firms could also help by aggregating demand for Brex, he added, as a “more diversified group” of loan applicants could fetch better rates from lenders.

Not everyone, even within the VC community, currently trusts Brex. Some investors have urged startups to place most of their money in America’s largest banks like JPMorgan Chase to minimize risk. Asked by forbes Speaking of its own financial health, Brex said it has nearly $1 billion in cash on hand. The way Brex is structured, meanwhile — with client money in short-term treasuries and not on loan or in assets to be held to maturity — the company could give all clients their money back the same day, Dubugras said, without that risk of a bank run that brought down the SVB. (Brex said it doesn’t hold such long-term securities itself, either.)

“We sure saw some people wire their money to the big banks,” Dubugras said. “But we have many more inflows than outflows. And we are not a bank.”

Dubugras said Brex doesn’t yet know what his limit for participating in the line of credit is, but said the $1 billion already outstanding is a long way from his ceiling. Interested startups, especially those who need funds by Monday or Tuesday, should apply over the weekend, he added, especially if they don’t already have a Brex account.

Brex itself does not plan to make any profit from facilitating those loans, Dubugras said. But don’t confuse such actions with altruism. The company hopes customers using 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, it’s terrible for our business that a lot of startups don’t have payslips and go out of business,” he said. “So solving this problem is a very good deal for us.”

What happens next with SVB: Dubugras said that based on calls from Brex so far, he is confident the situation will be resolved. “If the only banks Americans can trust are the big four, that’s extremely bad for America. Healthy competition in our banking system is something that is vitally important,” he said. “Our hope is that the FDIC will come out with something tomorrow and return at least some of the money to the companies this week.”

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