The early March failure of Silicon Valley Bank, Santa Clara, California, and continued pressure on other regional banks could have an impact on irrigation technology and innovation, especially startups, according to financial experts.
When SVB closed March 12, its clients included groups like Farmers Business Network and Bowery Farming, according to an Agri-Pulse article. The Federal Deposit Insurance Corp. was named as receiver for SVB, and depositors were able to access their money March 13.
Regulators additionally shut down two other regional banks on the same day, including Silvergate Capital, La Jolla, California, and Signature Bank, New York.
SVB was known as a go-to bank for startups looking for venture debt, a form of lending money for operations while a newly formed company is still raising money from investors, according to MSN.com. It was often especially a resource for new technology and sustainability companies.
“Its closure may have serious repercussions for these startup companies, hindering their access to funding and other essential resources,” says Jeff Mains, CEO of the Champion Leadership Group LLC.
Especially for startups in specialized sectors such as irrigation, the business expertise that a bank similar to SVB can provide can be essential, he says.
“Startups that are just getting off the ground and may not have the capital to engage their own in-house team of specialists might greatly benefit from access to this knowledge,” says Mains.
The increased scrutiny and pressure on other regional banks could have additional effects for companies built around innovation, reducing the availability of financial resources, he says. Many new businesses sought out SVB’s assistance to secure financing when more conventional sources weren’t an option, as can sometimes be the case especially for technology startups. Those enterprises would have trouble getting the needed funding without SVB and those like it.
“As a result, new products and services may be slower in coming to market, and the rate of innovation may decrease overall,” Mains says.
As the financial markets show signs of instability, the irrigation industry will continue to support innovation and conservation technology investments, says Julie Bushell, vice president of Paige Electric Company and Irrigation Association Board member.
“Water is the very foundation of our economy; there has never been a more critical time to protect our water resources and the many diverse companies that make up our industry’s fabric,” she says. “The world’s focus on water’s importance to life and economic stability has never been greater.”
The Irrigation Association has been monitoring the situation in relation to how it could affect irrigation companies and association members, says Nathan Bowen, Irrigation Association advocacy director. While the Fed’s actions have helped provide stability, there could be additional systemic issues in the banking and financial sector that begin to emerge and that could have repercussions for the irrigation industry and larger economy.
“We realize this is an evolving situation, and we will continue to follow the ongoing developments to support your business and industry success,” says Bowen.
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