April 17, 2020

Will Small Businesses Leave National Banks After PPP Fiasco?

Small Business
By: Ronald B. Allen

The CARES act is a relief package passed by Congress which featured a plan to help Small Businesses survive the COVID-19 crisis. The Paycheck Protection Program provides businesses with fewer than 500 employees, funds to pay payroll and a few other approved operating costs. The loans are fully guaranteed by the Small Business Administration. The loans can be forgiven if 75% of the funds are used for payroll for 8 weeks after the funding is received and the business keeps their current head count.

The PPP is intended to keep individuals employed and Small Business afloat. However, the funds were limited and ran out quickly. The program opened on April 3rd, and here we are, 14 days later, and the funds are gone. Congress allocated $349 billion to the Paycheck Protection Program. The response to the program from Small Business across the country was overwhelming. Business owners and accountants rushed to obtain the information necessary to receive funding from the program. Unfortunately, many banks restricted who could apply, which was met with outrage and backlash.

National Banks Provide Little Communication

Many small businesses that have applied with National Banks have received little to no communication about the Paycheck Protection Program. When speaking with their contacts at the banks local branch, they received a standard reply: We have an online portal and you will have to apply via the website. After applying, business owners did not receive an application number, just a message that the bank will reach out to them if they have any questions or need anything else. Communication ends there. Many owners are left in the dark as to if their application was submitted to the SBA, the timeline on funding or what notification looks like if they have been funded.

Small Business owners that applied through Regional/Local banks are having an entirely different experience. They have worked tirelessly with their bank contacts over the years to start, grow and expand their business. The relationship that has been developed may be benefiting them in a way that they never knew it could until this crisis. They were able to deliver their applications in person and via email on April 2nd. Assured that as soon as they could do so, the bank would submit their application to the SBA. After days of waiting, desperate to know if their business would survive the crisis, they are finally starting to get answers from the local and regional banks.

Business Owners Left Wondering

Now that the grossly inadequate funds have been depleted for the PPP, National Banks are releasing statements. The National Banks are trying to assure their customers that if more funds are approved by Congress, the applications that have not been submitted, will be once they know more. But many business owners are left scratching their heads, wondering if their application was ever submitted in the first place.

The question is, will the business owners consider developing relationships on a local level? If so, will National Banks see a mass exit of their Small Business customers?

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