Etsy Struggles To Pay Sellers Due To Silicon Valley Bank Ties: 'I'm Confused And Concerned'

E-commerce platform Etsy Inc ETSY is the latest public company to chime in on the impact of the collapse of SVB Financial SIVB. In the case of Etsy, it’s not just the company that's impacted, but its sellers as well.

What Happened: “At Etsy, supporting our sellers is our highest priority, and we understand how important it is for these small businesses to be able to receive their funds when they need them,” Etsy said in a Sunday statement that has since been updated.

“We recently experienced a delay in issuing payments to some sellers related to the unexpected collapse of Silicon Valley Bank.”

The company said it could begin processing payments to sellers as early as Monday.

 The company also said the payment delays were not expected to have a material impact on its current fiscal quarter.

The Effect On Etsy Entrepreneurs: Sellers on Etsy could rely on the income from selling handmade items on the platform as their main source of funds or as a secondary source, making the impact on sellers more significant for some than others.

“The delay in deposits came at the most inopportune time for our business: right after a large inventory purchase and right before a move across the country,” Etsy shop owner Cultivated Laser, who goes by Gee, told The Verge. “I have over 100 orders that have been fulfilled and shipped and have not received payment for.”

Etsy offers the ability to receive payments from the platform on daily, weekly, bi-weekly or monthly schedules, which could limit the number of sellers impacted.

A user who has their deposits set up daily shared their story with The Verge.

“I have my account set to deposit daily, so thankfully the amount of money in limbo is not a whole week’s pay,” cosplayer and Etsy seller Rachel Lynn told The Verge. “I do worry about how long the delay in getting my money could take.”

Some sellers expressed concern over a lack of notice from Etsy, with no in-app notifications or emails being sent to some people.

An Etsy seller who has the shop HookN20 told The Verge it was a text from her mom that alerted her about the bank's issues.

"There is no Etsy site update or alert, no communication. It feels not great," shop seller Alison Ugur said. 

Ugur said she's worried about receiving her payment this week and the ability to send out orders that haven't shipped. 

"If I ship them out tomorrow before my payment comes through, will I be paid for my work and when? I'm confused and concerned about Etsy and the future of my shop." 

Related Link: Roku Has 26% Of Cash With SVB Financial, Deposit Recovery Uncertain: 27 Other Companies With Ties To Collapsed Bank 

Why It’s Important: Amid the news of struggles to pay sellers and the risk of upsetting the loyal seller base upon which it depends, Etsy has been targeted by a short seller and recently saw its stock downgraded by an analyst. 

Citron Research issued a short report Feb. 16 alleging that Etsy has major counterfeiting issues and could face trouble from the FTC, DOJ, SEC, Customs and Border Protection and the brands that are seeing their trademarks stolen.

“Etsy has hit a new low as a public company. We believe management has knowingly or, at the very least, negligently, turned this company into the largest organized clearing house for counterfeit goods in the world,” Citron Research said.

Etsy told Benzinga in response to the short report that it takes intellectual property law seriously and has many safeguards in place. 

An analyst at Jefferies downgraded shares of Etsy from Buy to Underperform earlier this month and lowered the price target from $150 to $85.

The analyst said there are concerns over lowered spending by buyers on the platform and a concern over buyer churn.

ETSY Price Action: Etsy shares were down 0.8% to $105.13 Monday versus a 52-week trading range of $67.01 to $151.49.

Read Next: Bailout: Fed Rescue Depositors Amid SVB Bank Collapse 

Photo via Shutterstock.