Bonds

New Jersey directs $35 million to businesses hit by Silicon Valley Bank failure

Gov. Phil Murphy was quick to announce $35 million in support for businesses in New Jersey affected by the collapse of Silicon Valley Bank.

Two programs managed by the New Jersey Economic Development Authority will provide businesses in the state with critical short-term support and ensure investments “continue to flow” to emerging industries in the wake of the California bank’s market-rattling collapse last week, Murphy announced Sunday.

What New Jersey needs to do remains vague, as Sunday also brought the announcement that federal regulators issued a systemic risk exception to back uninsured customer deposits at the failed bank and New York-based Signature Bank, which also failed over the weekend.

“By offering a suite of programs for New Jersey entrepreneurs impacted by the SVB collapse, we will continue to keep residents employed and support companies that are vital to our innovation ecosystem,” Murphy said in press release.

$20 million will be made available through the Angel Match Program, which matches direct investments in local businesses of up to $500,000. The program was created to boost investments in research and development, marketing, and other fields, but will be leveraged during “this time of uncertain banking resources” to “extend the capital support from investors” to affected businesses, Murphy’s office said.

Another $5 million will help restart the New Jersey Entrepreneur Support Program, meant to encourage investment in local businesses by guaranteeing repayment of investor loans advanced for working capital purposes.

The remaining $10 million is slated for a yet-to-be-created liquidity fund the NJEDA anticipates it may need to “support impacted companies with a loan of up to $500,000 to provide short-term financing options for at most 12 months.” The proposal will be considered by the NJEDA board this week, officials said.

Scott Anderson, executive vice president for the Bank of West Economics said in an analysis published on Monday that the fear companies would not be able to make payroll this week had presented “an existential threat to the venture capital financing eco-system,” in the aftermath of Silicon Valley Bank’s failure.

With federal measures granting depositors “full access to their money” now, Anderson said, “the worst case cash-flow and layoff scenarios are taken off the table” for emerging industries and venture investors.

José Torres, Senior Economist at Interactive Brokers, said in the latest issue of the IBKR Economic Landscape published on Tuesday that investor sentiment was “high” as “fears of banking troubles moderated and the Consumer Price Index showed that February’s inflation, while still high, was in-line with expectations.

“After the collapse of SVB Bank and Signature Bank and the subsequent selloff of banking stocks, shares of regional banks such as First Republic, PacWest, and KeyCorp. surged this morning,” Torres said. “This indicates that investors believe fears of a contagion among financial institutions may be overblown.

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