Etsy is warning sellers that the collapse of Silicon Valley Bank on Friday is causing delays in processing payments, according to an email the company shared with NBC News.
The online DIY mega shop said it used SVB to facilitate payouts to some sellers and that it was working with other payment partners to issue deposits.
“We wanted to let you know that there is a delay with your deposit that was scheduled for today,” the email from Etsy said.
“We know you count on us to help run your business, and we understand how important it is to you to receive your money when you need it,” the email continued. “Please be aware that our teams are working hard to resolve this issue and send you your money as soon as possible.”
Etsy did not immediately respond to a request for comment.
Etsy claims 7.5 million sellers worldwide. Regulators put SVB into receivership around noon Friday to end a bank run on the tech lender that had begun Wednesday after it said it was seeking to raise more than $2 billion.
Etsy seller Owen McKinney told NBC News that the delay in payments would have a “catastrophic” effect on his business.
McKinney, who runs the Kentucky Country Home laser engraving business, said in an email that he relies on deposits to pay for items such as shipping costs and materials. He said he had already contacted one of his suppliers to postpone an order for materials he needed until next week.
“At this time, Etsy has not provided a time frame for the funds to be deposited,” McKinney said. “While I have a website, Etsy remains a big part of my business.”
Another Etsy seller, Rachel Briggs, has been on Etsy since 2010, selling her designs: enamel pins, key rings, and handmade art dolls. Briggs quit her office job in 2020 and has since been a freelance artist. She said her business on Etsy, in addition to her work as an illustrator, is a “huge part” of her household’s income.
Recently, Briggs paid for an “expensive” tax appointment with a professional to handle the documentation now that her income is less traditional. She expected her Etsy deposit to cover the cost.
“Getting the email that one of my most anticipated payments was going to be delayed was not really a good thing to wake up to,” Briggs said. Some of her Etsy sales occurred before the escrow was held up, she added, allowing her to pay for the tax benefits.
The drama with SVB started earlier this week when the bank revealed it was selling about $21 billion in securities and proposed offering over $1 billion in shares, all to raise money for “general corporate purposes.”
That move raised eyebrows among investors who wondered why SVB would raise so much money suddenly. It also worried depositors, many of whom suddenly wondered if their money was safe and started withdrawing money.
On Friday, the California Department of Financial Protection and Innovation said it was taking over and closing SVB to protect deposits, and named the Federal Deposit Insurance Corporation as its receiver. The FDIC has formed a separate entity where all insured SVB deposits—up to $250,000 per depositor – will be available Monday morning.
The shutdown came after a tumultuous morning for SVB, which saw trading in its shares halted after they fell by double digits before markets opened. This drop came on the heels of a drop of more than 60% on Thursday.
The closing marks the largest bank decline since the 2008 financial crisis and the second largest in U.S. history after Washington Mutual collapsed in the industry-wide meltdown, according to FDIC data.