Robert Owen’s antique store, DFW M’Antiques, in the eclectic Dallas neighborhood of Bishop Arts, survived to its 10th anniversary in October largely because of the Paycheck Protection Program.
Owen gives high marks to his longtime bank, which was bought in 2019 by BancorpSouth Bank in Tupelo, Mississippi. Even though ownership changed, the bank’s local employees stuck around, which paid off for Owen as he navigated the PPP process.
“It’s where all my transactions go,” he said in a recent interview. “I’ve been really happy with them.”
For all the
While it’s too soon to tally the effects for banks, early returns are promising. Small-business owners are upbeat in surveys about how their lenders handled the PPP — in spite of early negative press the program received. Consultants are stressing to lenders the need to retain specialized small-business teams. And small-business advocates are hoping the aftermath of the pandemic will usher in more opportunities for an often overlooked sector.
“At the very least, many small businesses are on a first-name basis with their bankers now,” said Holly Wade, executive director of the National Federation of Independent Business research center, which is planning to conduct surveys about whether these relationships are expanding as the program fades.
Owen’s bank, BancorpSouth, decided to sell $725.4 million of its PPP loans in the second quarter. The idea was to free up relationship managers from the tedious loan forgiveness process to get a head start on churning out new business. Though Owen said he isn’t looking for new products just yet, his bank has already shown that other small-business owners are.
“The decision to sell most of our PPP portfolio has allowed our relationship managers to have a renewed focus on calling efforts and generating new business,” BancorpSouth Chairman and CEO Dan Rollins said during an Oct. 26 call with analysts. “Their success is clearly demonstrated in our results, as the third quarter is our most successful quarter from a loan growth standpoint since prior to the pandemic.”
Excluding PPP forgiveness, the $48 billion-asset BancorpSouth reported loan growth of 3.3% between the third quarter of last year and the same period in 2021.
In April, the consulting firm West Monroe Partners began surveying 401 small-business owners about their PPP experience and whether it changed their perception of their lender. Roughly two-thirds reported a positive change, versus only 21% who reported a negative one, according to a report the firm published in October.
Neil Hartman, a senior partner in West Monroe’s financial services practice, said the PPP was a wake-up call for banks that needed to improve their handling of small-business clients. Too often, he said, these business owners would be funneled to bigger corporate banking units with complicated products they often didn’t need — or to the retail banking side, which is more tailored for consumers.
“Most institutions still do not know how to service small-business relationships adequately,” Hartman said.
More than 11.8 million PPP loans totaling nearly $800 billion were made between April 2020, when the program first launched, and its closing in May 2021. The government-backed loans are fully forgivable for borrowers who meet certain criteria.
For the banks that served as conduits, one of the biggest opportunities lies with small-business clients who first came to them for a PPP loan, either
Hartman implored banks to act now to develop broader relationships with those customers.
“Transactional relationships don’t last,” he said.
One bank that has been aggressive on this front is the $14 billion-asset ServisFirst Bank in Birmingham, Alabama.
About 10% of the bank’s first round of PPP loans went to small businesses that were new to the company, said Paul Schabacker, executive vice president at ServisFirst.
Over 90% of those new clients moved their core relationship to ServisFirst, often in the form of a deposit account, he said.
ServisFirst has an “active ongoing effort” to reach out to small-business owners who struggled with their existing bank to get a PPP loan, Schabacker said in an interview.
“It’s just an obvious and easy transaction to ask for the rest of the business,” he said.
The $12.4 billion-asset Busey Bank in Champaign, Illinois, pulled in more than $1.1 billion in PPP loans when the program was active. President and CEO Robin Elliott said the program was helpful in making small-business owners comfortable with applying online for financing when they have been wary of such processes in the past.
For Busey Bank, new clients from PPP resulted in a lot of additional lending, Elliott said.
“I can probably count on two hands the number that have left us after converting to us through PPP,” he said.
The Paycheck Protection Program didn’t save every U.S. small business, and there are lingering questions about the effort’s shortcomings.
During the recent Día de los Muertos commemorations at a branch of the Dallas Public Library, organizers set up an ofrenda — or altar — honoring the local businesses lost over the last year. But on the blocks near Owen’s shop, surviving businesses are preparing for the holiday rush and more signs of normalcy.
Owen, who received his first PPP loan last spring and later got it forgiven, is still waiting on more money after being approved for the program’s second round of funding. He said that his bank is working with the Small Business Administration to fix whatever hiccup is holding up the funding. Meanwhile, he reflected on how lucky he was last year to get through the program early.
“It just went really super smooth,” Owen said.
