THE ABRUPT CLOSURE of Silicon Valley Bank has hit dozens of local nonprofits.
The immediate concern was making payroll. But nonprofit leaders also worried how they could continue providing direct services for the disenfranchised residents who rely on them. Thankfully, it hasn’t had a drastic impact, but it could’ve meant life or death for many families, said Kyra Kazantzis, CEO of the Silicon Valley Council of Nonprofits.
“For example, some nonprofits that manage rent assistance programs would have had to stop providing that aid if they had lost or been cut off from their funds,” Kazantzis told San José Spotlight. “Losing that aid could make the difference between someone staying housed or becoming homeless.”
The Federal Deposit Insurance Corporation (FDIC) shut down Silicon Valley Bank Friday after uncertainty about its solvency led to a run on the bank — a crush of customers rapidly withdrew funds faster than the bank could keep up.
Late Sunday, the Federal Reserve Board said it would protect all depositors at Silicon Valley Bank, and New York- based Signature Bank, which was shut down Sunday, making sure customers would have access to all their funds beyond the $250,000 insured by the FDIC. The uncertainty had dozens of residents lining up at the bank Monday morning to pull their money.
On the razor’s edge
It’s been a tumultuous time because, unlike bigger companies, nonprofits often run on razor thin margins, Kazantzis said, so they don’t often have the resources to manage their cash like large for-profit companies.
Kazantzis said there are dozens of banks across Santa Clara and San Mateo counties that were in limbo when Silicon Valley Bank failed. She said the impact is felt more in San Mateo where many of the decades-old nonprofits used to benefit from free banking with the family-run Borel Private Bank & Trust. The Borel was acquired by Boston Properties in 2001, and 10 years after that, by Silicon Valley Bank.
“We think we have this figured out, but we’re not 100 percent sure as of right now. We are also concerned about checks to vendors bouncing.”Megan Fluke, Green Foothills CEO
Peninsula Family Service, which has provided social services in Santa Clara and San Mateo counties since 1950, is one of those nonprofits. CEO Heather Cleary said it’s been a stressful mess.
“My whole finance team has been derailed and will be for another few weeks,” Cleary told San José Spotlight. “It is a huge deal to contest everybody that wires money in or pays through direct deposit, which is how we make our payments too.”
She said it will likely take months before all financial matters are smoothed over and vendors know where to send their payments. Luckily, the nonprofit did not have to worry about payroll because it went through right before the bank collapsed on Friday.
A ‘tedious’ process
However, Green Foothills CEO Megan Fluke said she is still worried payroll won’t process for her 10 employees.
“We think we have this figured out, but we’re not 100 percent sure as of right now,” Fluke told San José Spotlight. “We are also concerned about checks to vendors bouncing.”
She said the longer-term problem will be figuring out what to do with all of the services that donors use to make contributions that are connected to Silicon Valley Bank. They are planning to connect them with their interim Charles Schwab checking account while they get a new bank account set up.
Cleary said it’s still an uncertain time for local nonprofits.
“Our biggest vendor accidentally sent money to the Silicon Valley Bank and it took me all morning to sort that out,” Cleary said. “It’s going to be a tedious and long process to make sure all payments and donations are done correctly so that we can keep doing our work.”
Contact Jana Kadah at firstname.lastname@example.org or @Jana_Kadah on Twitter.