The demise of major life sciences and Bay Area lender Silicon Valley Bank has sent ripples throughout the healthcare sector as startups who banked at SVB scramble to gain loans and access to cash.
The Federal Deposit Insurance Corp. announced Sunday that all depositors at Silicon Valley Bank would have access to their funds starting Monday and that taxpayers would bear no brunt of the secured cash, after regulators closed and took over the bank Friday.
Regulators also announced the closing of Signature Bank on Sunday, the third largest bank in U.S. history to shut down, after SVB.
The announcements from federal regulators come after a rapid four-day nosedive for the bank left some startups locked out of their funds and unable to clear payroll checks or pay bills.
SVB was a major lender and partner for venture-backed healthcare companies, with the bank announcing in January that it banked last year with 44% of U.S. venture-backed healthcare and technology IPOs and nearly half of venture-backed technology and life sciences companies.
The bank’s clients include Oak Street Health, which is currently undergoing a $10.6 billion acquisition from CVS.
In addition to providing commercial banking and treasury management services, SVB held a $300 million term loan credit facility dated Sept. 30 for Oak Street with venture debt provider Hercules Capital, according to a Securities and Exchange Commission filing.
To date, the company has drawn down $75 million of the credit facility, with SVB committed to providing $45 million of the remaining undrawn $225 million.
“While the Hercules Capital portion of the term loan commitment is unaffected, it is unclear at this time whether and to what extent the Company will be able to draw upon SVB’s remaining portion of the term loan commitment,” Oak Street wrote in the 8-K filing.
SVB announced it had committed $100 million to Privia Health, a patient and provider tool company. The bank also had backed venture rounds of companies like Olive, Carrot, Komodo and DispatchHealth, according to Fierce Healthcare.
Even healthcare companies that did not hold funds in the bank rushed to file statements with the SEC clarifying their positions.
SVB’s collapse comes as funding for digital healthcare startups dries up compared to record-highs of almost $30 billion during the coronavirus pandemic and the healthcare initial public offering market stalls.
In a Monday speech, President Joe Biden echoed the FDIC and attempted to ease concerns, announcing that the “banking system was safe.”
“All customers who had deposits in these banks can rest assured that they will be protected and will have access to their money today,” Biden said.