For small local banks and credit unions, the Paycheck Protection Program became an opportunity to gain new clients looking for hands-on help with the daunting, often chaotic, loan application process.
"We moved everything, and we're so much happier that we did," said Peg Rustand, a Chattanooga business owner who switched to locally based SimplyBank after she couldn't get help from Merrill Lynch, despite having been a client there for 25 years. "It was much more personal help. They've become our friends and they're constantly looking out for us."
The pandemic business rescue program delivered more than $780 billion in forgivable loans to fund 10.7 million applications across two rounds that began in March 2020 and ended May 31, 2021. But getting to the money, especially in the early days of the pandemic, was not an easy task, said Tai Federico, a Chattanooga veterinarian who moved most of his banking to locally based Millennium Bank after he hit a dead end with Regions Bank.
"It was very time-sensitive, and it was almost like being a kid at a birthday party where a piñata was getting hit and you just hope the candy falls your way," Federico said. "We realized that somewhere between our application and the federal government's pot of gold, Regions had dropped our ball. To this day, I don't know what happened."
But Federico knew Mike Haskew, the president of Millennium Bank, so he made a call. Within days, the application was moving and the money was on its way, Federico said. Ultimately, Federico moved most of his banking to Millennium, he said.
"I was convinced at that point that whatever relationship I had with Regions was purely transactional, and I wasn't a big enough number to make a difference to them," he said. "What it has reinforced to me is the importance of relationships."
More than one in five small businesses and one in seven mid-sized companies indicated they were likely to switch banks as a result of a bad experience with their bank during the Paycheck Protection Program application process, according to a 2020 Greenwich Market Pulse survey. With 30 million small and mid-sized businesses in the U.S. that means over 6 million businesses could switch providers.
Haskew said Millennium Bank may be a small player, but their ability to be nimble made the difference for people who came to them for help.
"We're dwarfed by the big regional banks, but we did our share and then some," he said. "We're really proud of that."
He isn't sure how many clients may have moved their banking to Millennium because of their experience with the loan process, but he took quite a few calls from folks looking for help, Haskew said.
"I was driving to work on a Friday morning, and someone I've known for 30 years — a SunTrust customer — called and said 'I need a PPP loan and SunTrust won't call me back. What can you do?' I said, 'We'll figure something out for you,'" Haskew said. "When someone calls anyone in the bank with an opportunity, I can get the loan committee together down the hall and meet this evening."
He has spent 36 years in banking, with most of those at large, regional banks, Haskew said.
"I spent 25 years in regional banking," he said. "I know the frustration of needing to go through Birmingham, Atlanta, Memphis. Turnaround time here compared to that is extremely fast."
PPP in Tennessee
238,508: The number of Paycheck Protection Program loans to Tennessee businesses through both rounds of the program, from March 2020 through May 31, 2021
$13,523,299,915: The amount of money lent to businesses in Tennessee through both rounds of the program
$56,700: Average loan size overall
99,579: Loans through the first round from March to Aug. 8, 2020
$90,088: Average loan size through the first round
138,929: Loans through the second round from January to May 31, 2021
$32,768: Average loan size through the second
Source: Tennessee Bankers Association
Trust Federal Credit Union President David Smart said he saw quite a few clients move their personal banking to the local credit union after his staff came through for them on the Paycheck Protection loan process.
"Some of those have moved their personal business over to us, but moving corporate accounts, that's something we haven't seen yet," he said. "But I do feel we'll get quite a bit of new business from it."
Some clients had gotten stuck in limbo with online applications for the loans, and Trust did the work to withdraw those applications and put in new ones manually, Smart said.
"They couldn't get anybody to call them back, but as soon as they moved it over to us, two or three days later they had money in their accounts," he said.
Truly small businesses — sole proprietorship or those with just an employee or two — often don't have accountants or attorneys to manage this kind of work for them, said Colin Barrett, president of the Tennessee Bankers Association. Bankers became crucial partners through the process, he said.
"The idea is, know your banker, know a person you can call and build that individual relationship," he said. "That personal touch is so important."
At a recent annual convention, he heard a lot of talk about banking clients moving their business because of their experiences with the Paycheck Protection program, Barrett said.
"I think you'd find with banks of all sizes, some were just more responsive," he said. "Some banks have gotten rave reviews for PPP, and some didn't. We were all learning so much as we went along."
Chattanooga attorney Robin Flores struggled early on to get help with his application for Paycheck Protection Program funds, and eventually went in person to First Bank, where he has been a client for years, to see if he could find someone to help him. He was about to close all his accounts when a branch manager got involved and asked him to give them a week.
"I was real close to doing that, but it's such a pain to close and reopen accounts," Flores said. "I figured they're being inundated and people can't figure it out, but once I actually had contact, that sped it up.
"They really didn't know how it was supposed to work," Flores said. "I had to keep the pressure on them."
Rustand was desperate for help getting the funds for her graphic design firm Widgets & Stone, but couldn't get the attention of Merrill Lynch, where she did her business banking.
"Merrill Lynch was really, really dragging their feet and they were taking care of the big businesses first," Rustand said. "It wasn't even being reviewed. The applications were just sitting in a holding pattern. It felt like a dead-end road.
"We'd been with them 25 years," she added. "It was really discouraging, honestly."
Rustand got in touch with Kathryn Gann, who was with Community National Bank in Ringgold, Georgia, at the time. That bank has since merged SimplyBank, but the bank is still locally based, with headquarters in Rhea County, Tennessee.
"Kathryn was amazing," Rustand said. "I can't even remember how fast it was, but within a week's time we had an application in and had a check."
Before Gann started working at Community National and then SimplyBank, she had worked for years at "big-box banks," and she heard from lots of former clients who needed her help during the chaotic early days of the program rollout, she said.
"There was a lot of confusion, and they weren't getting communications, callbacks," said Gann, who has been a banker for 17 years. "We were a little bit more manual in terms of our process, but for me that's what I really enjoy about the smaller community banks because we can really be our clients' advocates."
She gained several new clients, and SimplyBank gained multiple new accounts, through their response to the program, Gann said.
"They were like 'My application's not even in, what do I need to do?' And they weren't getting any guidance," she said. "It's a daunting process for customers because they're not the experts — we are — so if they have to go through bureaucracy, that gets frustrating and overwhelming."
Working for a local bank means direct access to the decision-makers, Gann added.
"We have a local board of directors, our board meets every Wednesday, and I talk about my loans and my opportunities, and they're talking to me directly and everybody's local," she said. "People want relationships. People don't want to be a file."
Another thing working in favor of local banks is that technology has become similar across the board, Federico said.
"You used to be at a disadvantage if you banked at your hometown bank, but the technology has gotten to the point where you have similar electronic access no matter who you're banking with," Federico said. "Now everything is instantaneous for everybody."
Contact Mary Fortune at firstname.lastname@example.org. Follow her on Twitter at @maryfortune.