Small Businesses Turn to Small Banks to Apply for PPP Loans
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What is the main topic discussed in this episode?
Here's your money briefing for Monday, August 3rd. I'm J.R. Whalen for The Wall Street Journal. In the height of the pandemic, many small business owners looking for loans ran into problems and delays working with big banks. That led some to turn to smaller alternatives.
bigger isn't always necessarily better, right? One thing that you can't always get at a big bank is a person on the phone that can help you navigate things, that can give you answers. You know, a lot of big banks prefer to do their customer service through hotlines and through, you know, websites.
But what are the trade-offs of moving your business to a smaller bank? Banking reporter Peter Rudiger will explain after the break.
How did PPP application chaos first affect small businesses on day one?
Another round of rescue funds for small businesses is likely to come out of the next stimulus bill being debated in Congress. But many business owners who found themselves under a mountain of paperwork applying for PPP money last time learned a valuable lesson. It matters who you bank with. Banking reporter Peter Rudiger joins us to discuss. Okay, Peter, this really goes back to the spring when the PPP process began. What did things look like for small businesses then?
So the Paycheck Protection Program started accepting applications on April 3rd, a Friday. A lot of small businesses logged on to their bank's websites to try to apply, and they found nothing a lot of the time. A lot of banks weren't ready to go on day one to submit applications. So a lot of them kind of panicked. They were expecting this aid to be available. They knew time was of the essence. They wanted to apply quickly. But the big banks just weren't ready. Seven days was not enough since Congress passed legislation to get new systems up and running to take applications in, to track the status of those applications. So it took kind of days, sometimes even weeks for businesses to even accept applications from these businesses.
And then a lot of the time when they even applied, Banks couldn't tell them where they were in the queue. There was some difficulties getting in touch with the government on which applications were approved, which weren't, which were acted on in what order. So businesses were just in this vacuum of information a lot of the time. And not only did the banks not know what the government was doing with approvals, but the businesses didn't know what the banks were doing with submitting applications. So it was panic-inducing for a lot of them.
And the business owners didn't really have a lot of time to spare.
If you'll remember, the Paycheck Protection Program was part of the CARES Act that passed Congress. Applications for PPP were open a week after that, April 3rd. And this is time of lockdowns, of stay-at-home orders. A lot of businesses needed that money quickly. And that first round of aid went away after about two weeks. It was all claimed. So time really was of the essence for a lot of these businesses.
So what are the tradeoffs for using a smaller bank?
So technology is probably the biggest one, right? Biggest banks spend billions of dollars every year on their mobile apps, on their online banking tools, businesses that can kind of take pictures of checks and deposit them remotely, that can manage a lot of their accounting software, directly integrates to the bigger banks. That's stuff that a lot of business owners take for granted. Smaller banks often don't even build their own technology. They're reliant on outside vendors to do it for them. And because of that, some of the businesses we spoke to in the story, you know, had a bit of a come down in their digital capabilities with their smaller banks. I talked to one business owner that with QuickBooks Capital One, her old bank integrated automatically with it.
All the transactions were automated. you know imported to quickbooks and now with a new bank she has to do that by hand and manually input every transaction so there is a trade-off but um you know again a lot of people think that technology isn't everything right that even if a great website and a great digital app doesn't mean a lot if there's not customer service or not an interest in that big bank to you know help them in their time of need so there definitely is a trade-off in terms of what smaller banks and banks offer
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–0:48
2
How did PPP application chaos first affect small businesses on day one?
0:48–5:24
3
Why did many applicants find big banks unprepared to process PPP loans?
5:24–8:08
4
What information gaps left businesses unsure about their PPP application status?
8:08–8:11
Speakers
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