Small Businesses were hit hard by Covid-19, which presented enormous challenges in the US and beyond. As the global economy reopens, the needs of entrepreneurs have changed. Here are 5 ways your institution can help.
By: Rich Givone, SVP of Digital Marketing Strategy, CS3 Marketing
The CBO’s projection is that the U.S. GDP will grow by 5.6% over the course of 2021, then ease to a still-above-trend 4.5% in 2022. Risks have shifted to the upside: instead of being worried about meeting payroll, employers are worried about finding enough employees to pay.
But one persistent question remains: what about America’s small businesses? The ones that are the backbone of employment and economic growth, yet had thinner margins while withstanding the disruptions of 2020?
There are signs for concern, and also places where the banking industry can make a difference.
For one thing, small businesses often run on thinner cash cushions. Pre-COVID, just 14 percent of small businesses with employees said they would use cash reserves to cover a two-month revenue loss, according to the Federal Reserve. Far more small firms said they would tap the owners’ personal funds, take out debt, lay off employees or downsize operations.
Based on broad economic data, PPP – the “public bridge” through the crisis – largely worked. According to the latest survey from the National Federation of Independent Business, nearly three-quarters of small businesses received a Paycheck Protection Program loan. (https://assets.nfib.com/nfibcom/SBET-May-2021.pdf)
Business owners held on, and with demand now picking up, they’re optimistic and prepared to capitalize on the recovery. The NFIB small business optimism index was 99.6 in May 2021. 6 of every 10 small business owners made a capex investment in the past 6 months, and 3 in 10 are planning on additional capital outlays in the next 6 months. Financial institutions can obviously play a big role in funding these investments.
But what else can bankers do to ensure small business owners can benefit from the bounce-back? And how can banks best support entrepreneurs who are ready to get back into the game? Here are 5 elements to consider:
- A New Generation of SBA Lenders. Bankers can grow their familiarity with resources like small business development centers and SBA loan programs. It helps that virtually every bank in the country is now an SBA lender because of PPP; there were just 2,000 active SBA lenders pre-COVID, but thousands more became SBA lenders to support their clients with PPP.
- Tip: Be sure your participation in SBA is well-understood by your staff, and well-communicated to local business prospects and current customers.
- Support M&A. There is a surge in M&A as a lot of small companies are actually selling themselves to larger companies.
- Tip: Proactively communicate via a regular cadence of text message and email to all business owners serviced by your institution about the areas where you can provide assistance: valuation guidance, placing a local spotlight on the business for visibility, financing options – whatever your products or local team can do to assist should be clearly articulated.
- Provide flexible resources for the rebound. Six in 10 small businesses reported figuring out new ways to get by, according to a Santander Bank survey from earlier this year. Providing capital as businesses figure out their new operating model is one thing: but what about alerting businesses to best-practices?
- Tip: Use your pulpit to communicate, educate, and reengage. Cultivate relationships now through a series of educational messages through multiple channels. Make sure small business owners know what tools are available to them as they pivot.
- Leave no business owner behind. Bankers have become sensitive to concerns that some minority-owned and women-owned businesses may have missed out on early rounds of PPP relief. This heightened awareness needs to continue. One obstacle to solve: many minority entrepreneurs were Schedule C filers—sole practitioners and self-employed individuals—who faced eligibility challenges early on during the PPP. (The Small Business Administration notes that roughly seven in 10 minority-owned and women-owned businesses are sole practitioners.)
- Tip: Be sure your message is clearly articulated, and work to gradually build trust within the community – a process which you can expect will be solely based on your actions, not based on your brand marketing. Be sure you use geo-location targeting to promote messages and ads to all locations, as email alone will not by read all intended recipients.
- Jump-starting the next wave of entrepreneurs. The first step is for bankers to make sure they are connected socially and professionally with entrepreneurs—even if their startups aren’t ready for anything more than a checking account to start.
- Tip: Hosting in-person or Zoom-based educational sessions for entrepreneurs, joining networks and associations, and sharing “Did you know?” information can all play a role. Have a local team member will visit a local business to spotlight it and promote it on social media – these are simple things can help startups get traction. Get the word out about these events with social media posts and with a nominal social media ad buy.
Whatever tactics the banking industry employs to cultivate startups and support existing small businesses, there’s fresh opportunity in the sector. Small businesses are the backbone of the economy for a reason, and now is the time to get creative in how you communicate your ability to support them.
Rich Givone is SVP of Digital Marketing Strategy for CS3 Marketing. Having begun his early career in banking, over the past 20+ years Rich has held senior leadership positions serving the banking vertical in companies specializing in digital publishing, digital marketing, adtech, and martech.