OLDSMAR, Fla. — Regulators rushed Friday to seize the assets of one of Silicon Valley's top banks, marking the largest failure of a U.S. financial institution since the height of the financial crisis almost 15 years ago.
Silicon Valley Bank, the nation’s 16th-largest bank, failed after depositors hurried to withdraw money this week amid anxiety over the bank’s health. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008.
And when that bank collapsed, the consequences were felt across the country.
For local small businesses in the Tampa Bay area that sell through Etsy, a small percentage haven't received payment from the online platform since last week.
Etsy used Silicon Valley Bank to disperse payment to vendors. When you buy something on Etsy, that money doesn't go straight to the seller.
"Etsy handles all income received," Nicholas Chachula said.
Chachula is the owner of iCustom Label.
"So it goes into their account, they hold it, and it gets deposited on a daily basis to us," he said.
In a statement posted to its website, the company said, "We recently experienced a delay in issuing payments to a very small portion of our sellers (0.5% of total active sellers) related to the unexpected collapse of Silicon Valley Bank. Our teams worked around the clock to implement a solution and, as a result, we were able to issue the deposits the following business day."
That statement was shared on Monday. Chachula said he hasn't received a payment since last Thursday.
"Etsy had notified us on Friday that they will be suspending some payments that are directed towards us from all the sales we've made," Chachula said. "They said they'd have it resolved by Monday. Monday has come and gone."
iCustom Label sells products like custom charcuterie boards, marketing posters, personalized doormats and other products. Sixty percent of the sales funnel through Etsy.
Financial expert and Florida Gulf Coast University Professor Dr. Tom Smythe said because the money is federally insured, small businesses are protected.
"But even prior to regulator announcements over the weekend that they were going to satisfy all deposits, retail depositors are fully covered by FDIC insurance," Smythe explained.
But that still leaves the question: When will businesses get their money?
"Relatively quickly, however, because the bank is now in receivership, the regulators will now manage the process of distributing cash," Smythe said.
This puts local businesses in a tough spot, waiting for the money needed to pay employees, vendors, and cover other operational costs.
"I will have to take out personal loans to make ends meet," Chachula said when asked if he can pay his employees without payment from Etsy.