I don’t know if “backroom deals” means “relationship deals”. Basically every private bank operates with relationship deals, meaning they know who you are, what you do, and they know your assets, on which the relationship manager can make a call what kind of loans or other services to provide.
What SVB did was that they know your are vc/founder who raised from a16z or whatever and have this many assets etc. Because of that information they were willing to give you a loan on favorable terms because see low risk defaulting on your loans. Based on quick google search Jason Calacanis net worth around is $60-120M. It seems reasonable that he should be able to pay mortgage with that net worth and SVB might want to come by his house to maintain the relationship.
How every other bank does it: they look at your credit score, ask 2 years salary, ask if you own 20% of any company and some other basic questions. The feed it to some algorithm running in cobalt which gives them answer if it’s good to go or no. They don't care about your profession (except if it's something illegal or qustionable), the fact that you run $100M business or your personal assets. You might have $10M equity portfolio but normal bank doesn’t care because it’s not part of their mortgage/model questionnaire. If you say yes to 20% company ownership question, their model then tells them to in the company revenue (again not assets but taxes and revenue) and the answer likely might be no because ge banks don’t like bank entrepreneurs (even if company has $100M in their bank account).
IMO SVB knew much more about the people they were making loans for than most common banks. Their main risk there was that they had huge tech industry concentration that could hurt them if tech completely melts down).
Common banks models optimized to dealing with companies and people who are cash poor who then need loans to bridge whatever they are trying to do. The primary way to asses risk is look at their cashflow the past 2 years.
(Disclaimer: I don’t have loans or deposits in SVB. I did apply for the mortgage with but didn’t take it)
What SVB did was that they know your are vc/founder who raised from a16z or whatever and have this many assets etc. Because of that information they were willing to give you a loan on favorable terms because see low risk defaulting on your loans. Based on quick google search Jason Calacanis net worth around is $60-120M. It seems reasonable that he should be able to pay mortgage with that net worth and SVB might want to come by his house to maintain the relationship.
How every other bank does it: they look at your credit score, ask 2 years salary, ask if you own 20% of any company and some other basic questions. The feed it to some algorithm running in cobalt which gives them answer if it’s good to go or no. They don't care about your profession (except if it's something illegal or qustionable), the fact that you run $100M business or your personal assets. You might have $10M equity portfolio but normal bank doesn’t care because it’s not part of their mortgage/model questionnaire. If you say yes to 20% company ownership question, their model then tells them to in the company revenue (again not assets but taxes and revenue) and the answer likely might be no because ge banks don’t like bank entrepreneurs (even if company has $100M in their bank account).
IMO SVB knew much more about the people they were making loans for than most common banks. Their main risk there was that they had huge tech industry concentration that could hurt them if tech completely melts down).
Common banks models optimized to dealing with companies and people who are cash poor who then need loans to bridge whatever they are trying to do. The primary way to asses risk is look at their cashflow the past 2 years.
(Disclaimer: I don’t have loans or deposits in SVB. I did apply for the mortgage with but didn’t take it)