A lot of business owners and independent contractors found out the hard way that big banks aren’t always the best fit when you’re a small business – evident by the PPP loan fiasco that was supposed to help bouy small businesses when the pandemic hit. Big banks are seeing an exodus as a result, seemingly providing small banks with a once-in-a-lifetime growth opportunity. According to a study by research firm Greenwich Associates, more than one in five small businesses unhappy with their PPP experience plan to switch banks.
“It’s clear that the frustration from some companies and business owners has driven them to the switching point,” said Greenwich Associates CEO Steve Busby. “If business owners did not know what it meant to be a borrowing customer or have loyalty from their bank, they do now.”
Greenwich estimates that more than 6 million small and midsize businesses could switch banks. That would put a vast amount of money in motion; the companies hold $290 billion in their checking accounts, have $350 billion in credit balances and produce $4.3 billion in annual checking and cash-management fees for banks.
Banks were deluged with applications after the hastily created PPP launched in April. Larger institutions gave priority to existing borrowers; customers with only a business-checking account had to wait in line.
Small banks – those with less than $10 billion in assets – secured 60% of PPP loans for customers in the first round of funding.
Larger banks seem to have done a better job serving small-business customers in the second round of PPP funding, lining up 53% of the $188 billion approved through May 10, according to the SBA. Still, millions of business owners won’t forget how big banks were unable to deliver at their time of dire need. And the personal touch from smaller lenders has been a revelation.
Source: Crain’s New York Business