Etsy delays payments to sellers due to Silicon Valley Bank collapse

Etsy is warning sellers that the collapse of Silicon Valley Bank on Friday is causing delays in processing payments, according to an email from the company shared with NBC News.

The online do-it-yourself goods mega shop said it used SVB to facilitate disbursement 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 that you count on us to help run your business and we understand how important it is for you to receive your funds when you need them," the email continued. "Please know that our teams are working hard to resolve this issue and send you your funds as quickly as possible."

Etsy did not immediately respond to a request for comment.

Etsy claims 7.5 million sellers worldwide. Regulators placed 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 the deposits delay would have a "catastrophic" effect on his business.

McKinney, who runs Kentucky Country Home laser engraving business, said in an email that he relies on the deposits to pay for items like shipping costs and materials. He said he had already reached out to one of his suppliers to delay an order for materials that he needed for next week.

"At this time, Etsy has not provided a time frame for the funds to be deposited," McKinney said. "While I do have a website, Etsy remains a huge part of my business."

Another Etsy seller, Rachel Briggs, has been on Etsy since 2010 selling her designs: enamel pins, keychains, 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 would cover the cost.

“Getting the email that one of my most anticipated deposits is being delayed was not really a good thing to wake up to,” Briggs said. Part of her Etsy sales occurred before the deposit was held up, she added, allowing her to pay for the tax services.

The drama with SVB started earlier this week when the bank disclosed that it sold about $21 billion of securities and proposed to offer over $1 billion in shares, all to fundraise for “general corporate purposes.”

That move raised eyebrows among investors who pondered why SVB would need to raise so much money abruptly. It also worried depositors, many of whom suddenly wondered whether their money was safe and began pulling funds out.

On Friday, the California Department of Financial Protection and Innovation said that it was taking over and closing SVB to protect deposits, naming 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 by Monday morning.

The shutdown came after a tumultuous morning for SVB, during which trading of its shares was halted after they fell by double-digits before markets opened. That downslide came on the heels of a more than 60% decline Thursday.

The closure marks the biggest bank failure since the 2008 financial crisis and the second-largest in U.S. history after Washington Mutual collapsed during that industry-wide meltdown, according to FDIC data.

Rob Wile

Rob Wile is a breaking business news reporter for NBC News Digital.

Henry Austin, Brian Cheung and Uwa Ede-Osifo contributed.