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Brex could offer loans up to 25% of the borrower's funds stuck in SVB. As long as depositors receive at least 25 cents on the dollar, the loans would be paid ba
by joefigura 4y ago
Brex could offer loans up to 25% of the borrower's funds stuck in SVB. As long as depositors receive at least 25 cents on the dollar, the loans would be paid back in full, and the borrower would have gotten significant working capital in the interim.
SVB's carcass still has significant assets, so Brex can set that % number based on what they know about SVB's state, to make the loans almost risk-free.
I'm not a banker and have no idea if this is actually what Brex is offering. That public page doesn't discuss terms at all, which makes sense given the chaos. But there's certainly ways to structure these loans without much risk.
- beberlei 4y agoLoaning money to a startup in this economy is far from risk free. Companies can go bust regardless of getting a part of their cash back
- mcherm 4y agoLoaning money to a risky borrower can be practically risk free if the borrower provides collateral. And the deposits in SVB are an excellent example of collateral. They are illiquid, but the funds are being held by the FDIC, which is highly reliable about (eventually) paying out (some portion, not necessarily the full amount).