Californian wine industry in shock after collapse of SVB
The Silicon Valley Bank was the go-to financial institution for the sector for 30 years.
The potential of a financial crisis in the Californian wine sector resulting from the collapse of Silicon Valley Bank, SVB, appears real, the financial institution very much the go-to destination for all parts of the industry.
The bank was closed on Friday by the Californian Department of Financial Protection and Innovation after a run by its venture capital customers, with estimates putting the number of wineries now locked out of their bank accounts in the thousands.
SVB provided financial support for around 30 years to wine businesses across California, lending an estimated $4billion with the bank seen to possess a deep understanding of its unique needs. A wine division at SVB was created in 1994, with a great degree of flexibility provided for businesses in a sector that can be very unpredictable in terms of growing season, and the fact that wineries may wait years to sell their products.
The businesses were, in turn, happy to give the financial institution their wholehearted support but today they are coming to terms with what the news will mean for them, with many wineries and associated businesses operating with limited cash reserves.
“Tech and venture are well-capitalised, but this could be a really serious reckoning for independent wineries,” according to Kendra Kawala, the co-founder of Maker, a Bay Area canned wine company. When the business started four years ago, she said “it was almost a no-brainer who the right banking partner was”.
Plans are in place for a new bank created by the Federal Deposit Insurance Corporation (FDIC) to hold the deposits and assets of SVB, with the hope that it will be operational almost immediately. The FDIC offers insurance for businesses with accounts below $250K, but those above that level must wait to discover whether their funds will be paid back.