Scott Burr knew his dental office and government agency human resources business, Team Placement Services in Alexandria, Virginia, was in trouble when the coronavirus pandemic broke out.
Burr joined the onslaught of support for the paycheck protection program through his bank, Truist Financial, with assets of $ 506 billion when the loans became available in early April. But his calls went unanswered.
A vendor at the $ 1.5 billion Capital Bank in Rockville, Maryland reached out to Burr and offered to walk him through the PPP process instead. Soon he had all of the paperwork, securing a $ 911,000 loan for his recruiting company and a $ 1.2 million loan for his separate painting business. He decided to switch his business accounts to Capital Bank after they granted him an additional $ 1 million line of credit.
“I would love it if it was old enough for you to stick with your old bank and your old banker, but that’s gone,” Burr said in an interview. “You’re just another provider now.”
Burr is not alone. Frustrated with the support shortage, more and more small business owners are considering switching banks, according to Greenwich Associates, which provides data to the financial services industry. And more are expected to go if the award process proves to be as difficult as applying for the loans.
Greenwich has tracked the “migration” of small business accounts from one bank to another. Typically around 10% of the monitored companies are looking for a new bank. Chris McDonnell, managing director at Greenwich, said that rate is three times higher than normal, and he largely attributes the increase to customers’ bitter feelings about their PPP experience.
“The amount of emotions and fears running through the minds and nervous systems of these business owners is increasing beyond normal,” said McDonnell. “People were really angry that their banks were prioritizing a bigger, more profitable relationship over them.”
A survey of small business owners conducted by Greenwich in May found that 29% of respondents said their opinion of their bank had deteriorated because of PPP. Only 13% said that their vision had improved after the application process.
McDonnell said with questions swirling about what loans will be made and when, banks run the risk of losing even more accounts if the frustrations of the PPP process increase.
“It remains to be seen what the forgiveness entails,” said McDonnell. “There could be another wave, a slightly different wave.”
Dunn said he grew impatient with his previous bank, Truist, as dental offices across the country began closing en masse to stave off the spread of the virus, and government agencies began issuing reimbursements for the payments he already made to employees he employed , had paid to procrastinate for you. Without PPP loans, he would have laid off all of his employees, he said.
A Truist spokesperson said in a statement that the Charlotte, NC banking firm has helped more than 74,000 companies secure $ 12.8 billion in PPP loan funding to date, and that the bank has been from the start saw positive growth in the number of new business accounts in the year to May.
“Throughout the PPP process we have focused on making this vital program available to our business and nonprofit customers and have mobilized thousands of teammates to meet the urgent needs of our customers,” said the spokesman.
Senator Elizabeth Warren, D-Mass., Sent a June 9th letter to the CEOs of Bank of America and Santander Bank in Boston with assets of $ 74.5 billion Warren admitted that guidelines for implementing the program were slow coming out from the Treasury Department and the Small Business Administration, but she mentioned “sleepless nights “That the banks caused to the owners who were left in the dark.
“I acknowledge that these are issues over which your institutions have little control,” wrote Warren. “However, since the program has been in place in the past few weeks, it appears that your institutions also have some of the responsibility for the PPP not adequately meeting the needs of all small businesses in Massachusetts.”
A BofA spokesman declined to comment on the letter, but said the banking company had issued more than 325,000 PPP loans to date.
A spokesman for Santander said in a statement that the company reviewed Warren’s letter and encouraged all customers who have expressed interest in the program to apply. The company closed $ 1.2 billion in financing for 10,500 customers.
“We continue to work with our customers to process open applications and prepare for the award phase of the program,” said the spokesman.
Many small business owners are still on the fence about switching banks, which can prove to be a messy process.
Andy Ricker, a Portland, Oregon chef who owned a number of restaurants with celebrity chef Floyd Cardoz, said he was considering leaving JPMorgan Chase after shelling during the first round of funding that came on 3rd; he was successful in the second round, which started in late April and is still ongoing. Cardoz died in March of complications from COVID-19. Six of their Pok-Pok Thai restaurants and bars in the area have closed, Ricker said.
“We will [switch] definitely as soon as we unravel the mess we are in with the closure of six restaurants, ”Ricker said in a direct message on Twitter. Ricker said thousands of companies like his were “caught up” early on in the process, but never received an explanation from JPMorgan for the delay.
A JPMorgan spokesman did not respond to a request for comment.
What was a headache for some banks was a godsend for others. Almost half of Capital Bank’s applicants for PPP assistance were not their clients prior to filing, CEO Ed Barry said in an email.
Many of these companies have indicated that they plan to switch their accounts, Barry said, which is difficult as companies are only trying to stay afloat during the pandemic. This means that banks may not see the impact of the exodus on their balance sheets until the economy returns to normal.
The National Federation of Independent Business, which advocates more flexibility and financing through PPP, asked small business owners whether they would consider switching banks.
Holly Wade, director of research and policy analysis at NFIB, said owners are generally “reluctant to switch banks when they have theirs”. [personal] Banking and business operations are linked, especially if you have a loan from your bank. ”
Greenwich said in its survey results that small business owners mentioned “terms of contract” among the complaints they had with their banks during the PPP process. On June 5, several legislative changes were signed that give small business owners who have received a loan through the program more flexibility to qualify for forgiveness, such as: The new rules also allow 60% of the funds to be used for payroll, instead of the previous 75% threshold, in order for a PPP loan to be granted.
Burr called the changes a “huge, huge deal” by extending the deadline for paying employees’ wages to 24 weeks as there wasn’t enough work for him to make the original hiatus.
Still, there are concerns how complicated the forgiveness application process will be as banks become the gatekeepers again. The request for forgiveness is still 11 pages long, and borrowers have to go through a lot of it. Banks are already Prepare for a flood of inquiries.
Burr said when he took out the loans, he expected them to be granted.
“If it was a loan, there is no way,” said Burr. “It would take years and years to pay that off.”