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SVB Clients at Risk of Default May Have No Choice But to Return

  • Loan covenants require borrowers to keep cash at bank
  • Startups that pulled money may already be breaching terms
Customers in line outside Silicon Valley Bank headquarters in Santa Clara, California, on March 13.

Customers in line outside Silicon Valley Bank headquarters in Santa Clara, California, on March 13.

Photographer: David Paul Morris/Bloomberg

Silicon Valley Bank is asking depositors to come back. Some may not have much of a choice.

That’s because for startups with loans from SVB, rules embedded in the legal documents governing the debt often require them to keep all or a portion of their cash with the lender. If the so-called covenants are broken, the companies could ultimately be considered in default.