By Beth Tancredi
The 2021 Small Business Credit Survey by the Federal Reserve Banks shows that 95 percent of small businesses have felt the impact of fluctuating restrictions across the country, with 26 percent who say they closed temporarily, 56 percent who reduced their operations, and 48 percent who modified their operations.
The survey goes on to report that the outlook for revenue and employment on small businesses is mixed. “Forty percent said they expect a revenue increase, while 41 percent said they expect revenue to fall. Just over half expect employment to hold steady, while just under a third said they expect it to increase in the coming year.”
As Main Street USA works to keep their businesses alive, they continue to look to their community banks as a lifeline of encouragement, guidance and financial relief.
At the height of the first PPP rollout, banks were already getting the thumbs up from their business customers. An April 2020 PwC report showed that 81 percent of small business owners had either maintained or grown their trust in their banks since COVID began. Sixty-three percent gave positive ratings to their efforts to communicate during the pandemic.
Now, as small businesses reimagine how they will operate moving forward, with the right blend of people, empowerment, customized solutions and technology, banks are well-positioned to be the hero by growing with them and supporting their efforts. Here are four ways banks can help main street USA thrive again:
Shift to outbound initiatives
Following the financial crisis from 2007 to 2010, individual customers and businesses alike lost their trust in banks. “The general sentiment across the country was that the banks walked away from their customers at a time when people needed them most,” says Justin Black, chief experience officer at Valley Bank. “We see the current environment as an opportunity to earn back that trust by showing them that we’re here and ready to help.”
Even before the pandemic started, Valley Bank had put that into practice by testing a program in Florida that better engaged small businesses. “We have always had small business products, but we knew we could improve on our outbound focus. We really wanted to put resources behind the product offerings and offer SBA lending expertise,” Justin adds.
After successfully testing the concept in Florida in 2019, Valley Bank took it to market in New York and New Jersey in early 2020, moving 40 bankers from the lending side over to business development officers for small business.
Even with the program in its infancy in the northeast at the start of lockdown restrictions, the groundwork the bank laid positioned it to better assist new and existing business customers through the pandemic and scale its operations accordingly through the initial PPP and beyond. Since then, the additional outbound focus on business customers has enabled the bank to attend to the individual needs of the businesses in its community.
For Iowa’s First Security Bank and Trust, rebuilding trust with customers meant knowing the make-up of the local businesses and who was most in need. According to Mark Miller, EVP and chief lending officer, in the first PPP go-around, 89 percent of the loan applications were for less than $50,000 and 21 percent were less than $5,000.
“For us, it was and still is about getting to small businesses who needed small loans—because those are real dollars that are significant to them,” says Miller, “And in the end, in rural Iowa, we want as many of those businesses still around at the end of this event as possible.”
Empower your customers
In a follow-up to April’s survey, PwC found in May that business customers are looking to their bank as a trusted adviser that will help them understand funding strategies available during this crisis.
“It’s not just about listening to the customer. It’s coaching and counseling. You need to be their confidential sounding board,” Miller says.
To be the trusted advisor does not mean, though, that you need to be the expert in everything. Miller suggests using your expertise where possible, but also familiarizing yourself with other resources in the community that are available.
When a loyal business customer of First Security was ready to retire, one of his long-time restaurant employees stepped up to take ownership of it. While some banks may have been reluctant to lend to a new restaurant owner during the time of COVID, the bank saw an opportunity to reward the restaurant for its loyalty and came up with a plan to get the new owner an SBA loan.
To meet the loan requirements, First Security directed the new owner to the Pappajohn Entrepreneurial Center at North Iowa Area Community College, where the owner learned more about the true value of the company, created a business plan, and assisted in establishing cash flow projections. This center, operated in partnership with the SBA, is one of roughly 1,000 locations for getting no- or low-cost consultation to help businesses start up and grow.
The restaurant successfully opened under new ownership in July. “That’s what small town community banks do in their footprint,” adds Miller.
Valley Bank, on the other hand, empowers its customers by offering a more digital solution for connecting business customers with the information that matters most. The bank has been holding a series of webinars to answer some of the most pressing questions from community business leaders, addressing topics like the changing rules around PPP loan forgiveness, mental health and navigating the pandemic.
Offer customized solutions
As small businesses shift into recovery mode, they will need to rebuild reserves and find creative ways to tackle current challenges. Customization is part of that solution set. Over the past year, First Security has been proactively reaching out to customers and listening carefully to their needs to come up with individualized plans.
“In some cases, we have offered extensions of payments on existing loans, because if keeping a little more cash on hand made them feel more comfortable about their circumstances, then it was better for everybody. In other cases, we looked at Economic Injury Disaster Loans,” says Miller.
Support your efforts with technology
“We don’t lead with technology,” says Black. “The relationship is our true purpose. Technology just deepens the relationship.” To that end, Valley Bank has implemented a number of tech solutions for both business and individual customers that have made the process of banking with them more seamless and COVID-friendly.
Recognizing the sometimes cumbersome steps of getting loans through the SBA submission system, Valley Bank added APIs and bots to its internally built case management tools to ensure a smoother application process, while still relying on the human touch to see the processes through when necessary.
The most significant implementation, perhaps, has been the addition of Docusign to the loan process. This digital solution allows customers to complete the loan documents and authentication process without having to physically go see anyone at the bank. And so far, Docusign has been fraud-free for the PPP loans the bank has issued.
Valley Bank has also added digital technology to offer access to tools, loans and deposits in a more streamlined fashion. The need for new technology does not end there though.
According a November 2020 Back to Business Study by Visa, nearly half of small businesses will be looking for security and fraud management software (47 percent), contactless or mobile payment acceptance (44 percent), and accepting payments via mobile devices (41 percent). Roughly one-third of businesses were interested in installments or “buy now, pay later”’ (36 percent) and digital backend payment operations (31 percent).
The reality of the COVID-19 lockdowns is that even as restrictions fully lift, the way Main Street USA lives and breathes is going to look very different than what it was before. “There’s not going to be a switch that is flipped and things go back to the way they were,” explains Miller, “Most are expecting this to totally change the way they do business.”
And that is true for banks and small businesses alike.
Beth Tancredi is a New Jersey-based writer whose focus is financial services, advertising technology, healthcare and the media.