Etsy's bank fails... what next?

[#1]

The collapse of Silicon Valley Bank today is awful news.  I wonder what this means for Etsy sellers and funds.  

https://www.wsj.com/articles/after-silicon-valley-bank-fails-tech-startups-race-to-meet-payroll-4ebd9c5c

[NixAeterna]

@CoquetteBath - Sorry to disagree with you, but I've seen more than one seller lectured to in here, about how they are responsible for a package once it has been handed to a courier, because they CHOSE which courier to use.

By the same token: Etsy CHOSE which bank to use, so this was something that was TOTALLY under their control.  SVB's share price has been on the slide for the last year.  The warning signs were there, but appear to have been ignored and now it's the sellers who are going to pay...

[PriddeyThings]

@NixAeterna That's a pretty far-fetched comparison. One small scale online transaction vs the complex world of corporate banking and investment - seriously?

None of us know the details of how Etsy manages their / our money. I'd rather wait and see what comes out in the public domain, keep an eye on the stocks and be level-headed. Running around aimlessly crying "fire!!" helps nobody. 

[clotheslinesvintage]

Hmmm. I find your tone condescending @CoquetteBath .There is quite a bit of that here on the forums these days. Why bother? Listen, happy for you that you have a rainy day fund, but some do not and that is the reality for many the world over, whether in business for themselves or not. Some are single-parents wth only one income, some may have partners who just lost their job or a big contract recently, some folks might have been dealing with illness and had to dip into their savings, all of us just survived a world-wide pandemic that changed the pace of business for many sellers here. It isn't kind to scold ppl and lecture them for their fears or concerns over loss of income short or long-term. People are coming to the forums on this issue because there is a lack of clear and transparent communication by Etsy - they want reassurance and to gather information and decide their next steps, I am sure that they aren't looking for financial council from you. JMO.

[CoquetteBath]

@NixAeterna 

Total agreement with you in that Etsy chose their bank.

but, let's unpack this a bit. Did they review each & every account to validate it? Do you? I personally do not. I go to the local bank (which is not this one...) and put in a deposit. I actually have deposits and such at more than 1 bank.

They likely didn't expect that bank to fail. Who does?

so while it is convenient to link the two (you choose your carrier, Etsy chose their bank) this is an apples & oranges situation.

You can be angry at Etsy. I respect that. I don't think they do much the way that I would. But in this case...while yes, they chose the bank...this is not on them.

@clotheslinesvintage 

no disrespect intended. And you don't know me or my situation, either. Single parent. Partially disabled. BUT I am a child of folks who lived through the Great Depression and the need to save & be cautious is ingrained. Maybe that's my inner super weapon, but I always look for another way to do something. Because, life has taught me, there is always a different way. AND I do think that it is possible for people to start an emergency/rainy day fund. If not, I don't think that person has enough capitalization to be in business. I remember one such seller who had to give a refund years ago, and whined in the forums about how she'd already spent the money and the customer 'would have to wait until she had another sale to get a partial refund'. Ummm...no.  Since you never know what life will throw you...best to always have a safety net.

[bradgoodell]

Etsy's finances should be able to whether this until it is figured out.  SVB reopens on Monday.  And Etsy has cash reserves, banks all over, and a huge line of credit.

All that together makes Etsy able to weather this.  Here is an article about SVB and Etsy:

https://www.eseller365.com/etsy-delays-seller-payouts-silicon-valley-bank/?fbclid=IwAR22ODntY0J6koTx...

Etsy Exposure to Silicon Valley Bank

Late in the afternoon, Etsy sellers on online forums began complaining that their scheduled payout for Friday, March 10 had been automatically delayed until Monday. Some people began to speculate that Etsy may be using SVB and that this massive delay was connected to the bank’s failure.

Now, Etsy issued an email to sellers confirming the reason their scheduled deposit was delayed due to “recent developments regarding Silicon Valley Bank, who Etsy uses to facilitate disbursement to some sellers.”

Etsy further said, “We are working with our other payment partners to issue your deposit as soon as possible.”

The company didn’t provide any further details on how large its exposure is to SVB. However, unlike VC backed startups and smaller tech firms that may have most of their funds in one bank, Etsy should have the financial resources to make sellers whole relatively quickly.

While affected sellers their payout information says March 13 now, the email from Etsy doesn’t offer that specific date. Sellers should expect that payouts could be delayed a little further, depending on how quickly Etsy can arrange for an alternative distribution solution.

For those worried about Etsy’s financial situation, let’s take a brief look at their last financial filings(Form 10-K).

At the end of 2022, the company had $1.2 billion in cash, cash equivalents, and short- and long-term investments. Of that, $921 million was in cash and cash equivalents.

In addition, Etsy has a revolving credit facility (credit line) of $200 million, which was still available in full at the end of the year. In other words, they weren’t using any of it.

Obviously, without knowing the exact exposure the company has to SVB, we believe Etsy should have enough financial resources to pay sellers. It finished the year off better than many of its peers.

Another good sign for sellers is that the company’s stock price has remained stable in after hours trading, further indicating that the “smart money” on Wall Street is not concerned as well.

[CraftyCornishMaids]

@NixAeterna 

handing a package to a courier that messes up, is not the sellers fault, but it is their responsibility 
they can do things to help themselves .... take out insurance, self insure, make sure they have all 9 seller protection hurdles covered, have a rainy day fund ... etc etc

the same with etsy, it's not their fault the bank collapsed, however, they should have alternatives, so it doesn't put them out of business

If you are so worried about Etsy, that you close your shop for a while, that's fine, your choice, but it 's definitely not something I will do, or think is a sensible option for me, and probably 99% of others

[PriddeyThings]

"Another good sign for sellers is that the company’s stock price has remained stable in after hours trading, further indicating that the “smart money” on Wall Street is not concerned as well."

This is the key thing to watch. And the message here is positive.

[NixAeterna]

@PriddeyThings - It's the principle of the thing.

But don't let that concern you. Just remember that all you are to Etsy, is "churn".

[PriddeyThings]

@NixAeterna we'll have to agree to disagree on this because I don't think 'principle' has any connection with this situation. 

And the only relevance this has to how Etsy sees sellers is that they should have the good grace to put out a statement to let us know their take on the situation. 

[ChantillyAvenue]

Maybe wait until Monday to start eating our young?  Just a thought...  I got the email and have a daily deposit hanging out there to keep an eye on, but I feel reasonably calm about it for the moment.  I don't know what else you can do anyway.  Panic and run around in circles,  or wait, stay calm, and see what, if anything, happens on Monday.

[EnergyPeace]

The only thing that would be their fault is if they held a majority of their assets in that bank. Hopefully that isn't so. 

It is their fault that they don't come out and tell us that. Transparency would be helpful. 

[EnergyPeace]

@PriddeyThings well why aren't Etsy putting out the fire by stating they didn't hold much of their assets there and just need to reorganize and everyone will be paid as it is merely a small loss with this bank that will not affect their finances?

Wouldn't that be an easy thing to do if that was the case?

[onedaysgracenz]

Some of the posts in this thread are exactly the same as why SVB collapsed.

People panicked - for no good reason, caused a run on the bank, and there you have a collapse.

Some posters in this forum seem to be trying to create the same scenario on Etsy TBH.

Won't happen though because no sellers have the sort of power over Etsy that corporates have over a bank. Anyway not all sellers are affected by this in any way.

Why doesn't Etsy issue a statement? Maybe because they are being prudent and finding out what the situation is before doing so. Maybe they are putting things in place to make sure sellers funds are protected and can't be bothered about panic in forums right now. Wouldn't YOU rather they spent the weekend protecting your payments?

Perhaps it would be better to wait and see what transpires next week before getting stuck into Etsy's handling of the situation.

There is nothing any seller here can do, so why not take a wait-and-see approach? Is there a personal reason why anyone wants to see panic in the forums maybe?

The forum posts here are already being quoted as "reliable sources" across the www - complete with your shop name on every comment you make.

[bradgoodell]

@onedaysgracenz  Worry is a spectrum.  Some sellers are on the high end, some are on the low end.  

While I wish Etsy would put out some sort of statement, I do agree they need to be prudent about what they say.  The wrong statement could be misconstrued and drive the panic up.  There are those who seem to be attracted to the worst-case situations, always.

Your post is well-articulated and thoughtful, BTW. 

[onedaysgracenz]

@bradgoodell  - I absolutely agree with you about anxiety being a spectrum.

What anyone chooses to post in a public forum isn't a spectrum though. It is a conscious decision.

Sellers should be a bit more concerned about the fact that their comments are being quoted under their shop's name, and they have no idea who is reading what they have to say.

Those quotes from individual sellers will be available online for eternity thanks to Google, and come up when anyone does a Google search for the shop name.

If a buyer is searching for a shop and comes up with the comments that shop posted here, would they feel confident about completing their purchase from that shop I wonder?

IMO, sellers need to protect THEIR business reputation right now, no matter how worried they might be personally.

Etsy will weather this storm, but many small sellers may not if they make themselves look panicked & in danger of imminent business collapse themselves according to their own posts in Etsy forums. No buyer is going to want to purchase from a shop that looks as if the owner believes it is going to close very soon due to a bank collapse or Etsy's problems.

And posts here are indicating that BUYER's money is not being paid to sellers. How does anyone think a buyer is going to feel about that?

[greenmelonstudios]

@onedaysgracenz I agree with 90% of what you said EXCEPT saying people panicked with SVB for no good reason. I'm curious as to why you say that, as every article (legit sources) that I have read there was VERY good reason to panic.

[barkrock]

One small but important point:

''Each of their accounts is covered by the insurance. ''

Not entirely true. Accounts are covered by FDIC to the amount of $250,000 PER DEPOSITOR ID at any one bank. So if one opens 4 checking/savings/CD's at a bank for $250K each, using the same SS# on all of them, one would be covered only for $250K, NOT $1,000,000.

IOW, opening multiple accounts at one bank isn't going to save anyone.

[FourDaisiesDesigns]

Unfortunately according to the FDIC, all of a company’s assets are totaled up and only covered up to $250k. 

Coverage Limit: All deposits owned by a corporation, partnership, or unincorporated association at the same bank are added together and insured up to $250,000, separately from the personal accounts of the owners or members.

https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/

[DivineCrossings]

Following….

[boygirlboygirldesign]

@DivineCrossings 

Me too.

[59BeadsforMary]

…”my payment that was scheduled Friday never happened instead received the letter about SVB, so they moved the date to today 3/13/23 payment was set for today, and it’s now been moved again to tomorrow 3-14-23, from reading the posts at least they paid their UK sellers yesterday why not us? Please at least send an email explaining the situation instead of guessing here on this forum. My electric company wants their money now, I can’t tell them Etsy is working on it ….

[CryzalisDesigns]

Either way the proper steps for Etsy would have been to make an announcement to all sellers, respect does not cost a penny and the sellers deserve more, without them they would have more to worry about than a bank going under

[PriddeyThings]

That I do agree with.  

[bycinbyhand]

They've not been the best with transparency... long standing tradition...

[dayspringcollectible]

They had an announcement up within a day of the event, on Technical Issues.