Credit Crunch: An Update For Borrowers

The collapse of Silicon Valley Bank and Signature Bank on March 10 and 12, 2023, respectively, sent shockwaves through the venture capital, entrepreneur, technology innovation, and life sciences communities, as well as those companies that regularly rely on bank credit commitments to fund operations and working capital. Businesses with deposits at those institutions spent the weekend scrambling to secure cash to make payroll that was already earned by workers, and to address contingency planning to pay workers or reduce workforce.

Borrowers from these institutions did not know if the loan commitments would be honored and whether their deposits would be given dollar-for-dollar credit against loans already incurred. Wise borrowers are continuing to evaluate sources of liquidity, and their loan documents, to best position themselves in the credit market.