With the Paycheck Protection Program ending, many businesses that relied on these loans are rightfully asking the important question: Now what? PPP loans helped fortify businesses against a staggeringly bleak COVID-19 economy, but just because the worst of the pandemic is over doesn’t mean businesses are in the clear.
During the height of the pandemic, the PPP offered a unique blend between private banking and government support. Bankers were working overtime to save small businesses, sometimes approving loans at their dinner tables and through drive-thru windows. The government, in turn, provided significant incentives to businesses of minority ownership, infrastructure-based businesses, and other businesses that regularly help contribute to the public. These efforts were not only laudable, but altogether necessary.
Now we come to the aftermath, and it is up to us to decide how we continue the legacy of PPP.
Many businesses will soon see their PPP loan amounts exhausted but have not yet experienced a return to normal in terms of their volume of business. Restaurants, for example, may be serving more people, but for many this relative increase still represents a net reduction in business as compared to pre-pandemic levels. What this means for those small businesses is that even if their PPP loan amount is forgiven, they will still be operating at a loss, something that many businesses have already done for months and others will lack the capacity to endure.
However, there is still hope for struggling businesses in the form of extra relief from the Small Business Administration. With an eye toward the future, the SBA has extended many of its grant programs, such as the Restaurant Revitalization Fund, the Shuttered Venue Operators Grant and the Economic Injury Disaster Loan programs. Each is designed to be a more targeted iteration of PPP-like protections. These grants are directly applied for by individual business owners but are steeped in industry jargon and conditions that a business owner may find overwhelming.
These sometimes hard-to-get-at grants represent a golden opportunity for community banks.
Community banks in Maryland, for example, have succeeded in granting proportionally greater amounts of PPP funding to their communities than other financial institutions have, according to a study conducted by the Baltimore Business Journal. This underscores the ethos of the local bank, one of direct, targeted and immediate assistance.
While PPP loans are no longer originating from these local banks, there is no reason their assistance to the community should stop. Local banks should seize this opportunity to educate their employees on SBA grant applications to better assist small-business owners applying for these programs.
The idea is reminiscent of a time when people considered banks financial advisors — the brick-and-mortar store for all things financial, if you will, and this was on full display at the height of the dual economic and public health crisis of the last 15 months.
For bankers, the benefits of becoming informational centers are multifaceted and abundant.
By inviting people to come in for information, banks will continue to expound on their more active roles within the community, building trust and rapport with the small businesses they interact with daily.
Additionally, when acting as an educational resource, local banks will be able to not only help grant applicants at every turn in their application process, but also be able to determine if specific grants or programs are right for the individual small business. With ample opportunities available to help customers, community banks should become places with answers to hard questions.
Imagine the following scenario: A small-business owner walks into a bank for information on SBA programs. They are greeted by friendly and well-informed bank employees. These employees help the business owner determine what restrictions applied to their specific PPP loan and help select what program is right for their business. The small-business owner then applies to the program independently and receives money that keeps their business alive. The bank has now demonstrably invested in its community, embodying the philosophy of the local bank.
While the post-COVID-19 economy has left a lot of us with more questions than answers, banks and bankers can still be key sources for solutions.
The economy will likely continue to improve in the coming months, and many small businesses will be better off for it, but banks can serve as educators for those businesses that might otherwise slip through the cracks. With all of the administrative requirements that go along with receiving SBA funding, the local bank can demystify the process, giving a small-business owner clarity about their own unique situation.
The banking industry cannot afford to miss this opportunity to build upon the successes of delivering for their clients, communities and employees throughout the COVID-19 pandemic. The added value to the banks will be demonstrated in long-term client retention, along with continued positive stories of how banks have helped to support entire communities. The COVID-19 world has and will continue to present challenges, but opportunities like these are ever present, evolving alongside the pandemic’s forecast. Community banks, as always, should be ready to deliver value for those who need them most.
