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What would happen if SVB customer themselves went bankrupt? Say some risky investment startup was banking with SVB and had $1 million with them. They can now ta
by delusional 4y ago
What would happen if SVB customer themselves went bankrupt? Say some risky investment startup was banking with SVB and had $1 million with them. They can now take out a bridge loan. What if that investment startup now suffers its own liquidity crisis (or even just waste all the money) and default themselves. How is brex covered in such a case? Wouldn't they have to get in line with all the other creditors/investors?
- SteveNuts 4y agoThat's why they charge interest, they would have calculated the risk of that happening to make sure the amount they charge in interest would still net them the desired profit.
- muzz 4y agoIsn't the loan backed by the deposit at SVB? That seems like the whole point of it. Yes some startups will go bankrupt and most of the remaining ones won't be profitable any time soon. Surely Brex isn't counting on the profit from operations of the borrower to repay the loan, but rather that company's deposits at SVB being released at some time in the future.
- hnfong 4y agoMost likely Brex would structure the bridge loan so that they would be a secured creditor due to having a charge(?)/lien(?) over the rights of the client's SVB deposits. Not sure how this works out in practice, IANAL, etc.