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How the PPP loan program became a marketing campaign for smaller banks like Fulton, BNB

By June 2, 2020No Comments

(This post originally appeared on

There is no doubt that the Paycheck Protection Program — the forgivable loans offered by the Small Business Administration through lenders nationwide — has had its share of challenges. But it’s hard to argue the critical role that small and midsize banks played in getting the money out to those companies in need, a role that will not be forgotten and will likely affect small business banking in the future.

The numbers speak to this. As of May 23, the SBA reports the program has approved more than 4.4 million loans totaling more than $511 billion. But more importantly, the vast majority of these loans have been distributed not through large banks but via more than 5,500 lenders across the country, with almost 5,400 of them having under $10 billion in assets (and about 3,500 of them having less than $1 billion.)

In the program’s early stages, the country’s largest banks were criticized for their slow rollout and alleged favoritism for their largest existing customers, whether or not they could get financing elsewhere. But smaller banks continued to churn out the paperwork. And as the weeks went by, most of my clients who sought these loans did so through a smaller bank rather than a larger one.

“Although we have most of our accounts with a large bank in the area, we chose to apply for the PPP loan through Fulton Bank [a $23-billion Lancaster, Pa.-based lender],” the controller of a Bristol, Pa., manufacturer told me. “They were extremely responsive and made the process easier.”

The managers at Fulton Bank realized that the SBA program wasn’t just an opportunity to help existing customers. They also recognized it as a great way to get to know other business owners in the area.

“It was the quickest type of a marketing program you could put together,” said Kevin O’Connor, the president and CEO of BNB Bank, a $5 billion institution with 39 branches. O’Connor said BNB processed over 4,000 loan applications for small businesses, of which 1,000 were from new clients. “We had tellers, back office people, and loan officers working 24/7 to get these loans processed,” he said.

The guidelines early on from the SBA were scarce and online platforms were still being established to process applications. This proved to be a bureaucratic hurdle for the larger banks, causing them delays. But despite these challenges, many smaller banks like Fulton and BNB pressed forward, often having to resend updated applications as the rules changed.

“But we weren’t embarrassed by that,” O’Connor said. “When you’re nimble and small, you can make judgment calls that were in our control on the fly. When we saw the magnitude of what this [the SBA loan program] was then, it was incumbent upon us to implement a process to build that lifeline.”

For small businesses needing more advanced services such as international transactions or complicated financing , a bigger bank may be more suitable. Also, smaller banks often lag in technology — mobile apps, online banking — that most big banks have. But smaller banks catch up in the most important part of a banking transaction: the relationship.

And, according to a recent report from the New York Federal Reserve, this relationship has significantly helped small businesses receive PPP loans. The report found that, in states where community banks had a larger market share than larger ones, small businesses received more overall PPP funding. This is why a larger percentage of small businesses in states like North Dakota, Nebraska, and Oklahoma received PPP funding than their counterparts in Pennsylvania, New Jersey, and Delaware. The smaller banks were simply more responsive to clients’ needs.

In the end, most small business owners aren’t experts at financial things. We’re experts at what we do. We need a bank that understands that difference and helps us get the financing that makes sense for our businesses. We need an ongoing partnership to help us better understand our finances and financial statements. It’s why, in my opinion and given their response to the pandemic, a smaller bank is better suited to work with a smaller business — and why I believe that many small businesses will migrate toward community and independent banks like Fulton and BNB in the years to come.

“Everyone says they have an accountant, a lawyer, and a bank,” says O’Connor. “I want people to say they have an accountant, a lawyer …and a banker.”

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