Lenders say relationships key to helping small businesses survive pandemic’s economic worst

When the federal Payroll Protection Program was signed into law, it was all-hands-on-deck for the nation’s bankers to help clients gain access to the valuable cash-flow assistance.

Darquia Biffle, owner of Big Daddy’s BBQ in Gary, was able to keep employees on the payroll — and hungry customers fed — with the assistance of a Small Business Administration loan that covered two-and-a-half months of payroll for the restaurant.

“When everything first hit, business slowed down — a lot,” Biffle said. But she kept all the workers employed as customers either picked up meals or used delivery services.

The federal program “worked exactly the way it was supposed to for us,” she said.“It wasn’t as complicated for me as I’ve been reading,” Biffle said. “Centier worked pretty hard for us.”

Unprecedented lending

Christopher Campbell, senior partner at Centier Bank, said working with the hastily approved program has been “an on-the-fly experience for the entire industry.”

With rules in constant flux for the SBA program, lenders burned the midnight oil to learn how to get funds to clients.

“I have heard story after story about how long and hard bank staffs worked to assist small businesses, sometimes working literally through the night to keep up with demand,” said Amber Van Til, president and CEO of Indiana Bankers Association.

“One bank CEO said that he sent several of his best clients to competitor banks when his bank experienced delays accessing E-Tran,” the SBA’s portal, Van Til said.

Campbell said Centier’s commercial lending team used help from throughout the organization.

“What we were trying to do is put through two years of loan volume in a six-week space,” Campbell said.

Other lenders shared similar experiences.

Larry Mayers, group head for business banking at 1st Source Bank, said the bank typically processes between 140 and 150 SBA loans annually, which makes 1st Source one of the SBA’s biggest lending partners in Indiana.

“We did the equivalent of 20 years’ worth of SBA loans in the space of two weeks,” Mayers said.

“This was a wildly popular program,” he said. “There was a mobilization of talent from all over the bank.”

Normally, the team handling these loans is comprised of a handful of people. But the PPP program required the effort of 100 people at various points, Mayers said.

“You learned the valuable of being flexible,” he said. “You learned to make changes. You learned to adapt. We were adapting processes on the fly.”

The credit department helped set up processes. Most bank branches had closed their lobbies, so 1st Source used resources from branches throughout the bank to process paperwork. The commercial lending team relied heavily on the information technology team for automation, too.

Dennis Kuhn, executive vice president and chief commercial banking officer for Horizon Bank, said it was a difficult process “from the standpoint of the suddenness of the project and changes along the way.”

Horizon Bank processed more than $305 million in PPP loans throughout its market, more than $80 million in Lake, Porter and La Porte counties alone, Kuhn said.

That’s a total of more than 2,000 loans processed in roughly a month’s time.

“It was absolutely unprecedented,” Kuhn said.

“Everybody chipped in. Everybody worked very long hours,” he said. “Everybody worked weekends.”

Some bankers at Horizon and elsewhere did overnight shifts to get easier access to the SBA system, which was extremely busy during normal business hours.

“It really would have been impossible to pull off” without Horizon’s employees working with such dedication to serve the customers, said James Neff, Horizon’s president.

Horizon Bank recognized employees for their efforts, including providing lunches in the office for the employees — which supported local businesses as well as the bank’s staff, Neff said.

Reaching out to customers

Teachers Credit Union was founded during the Great Depression in 1931.

“As we’ve dealt with the impact of the pandemic, TCU has taken a page from our past,” said Nicole Alcorn, TCU’s chief member experience officer. “Our mission of people helping people has inspired our work.”

In the three months beginning March 15, the credit union waived almost 7,000 fees, pushed bank payments on more than 16,600 loans and mortgages, and approved 550 PPP loans for small businesses, Alcorn said.

With branch lobbies closed to the public, TCU employees made almost 35,000 phone calls to members to say hello and check in.

“We want our members to know we care about their well-being and are here to help,” Alcorn said.

The TCU employees also helped members learn about options available to them if they were suffering financially because of the pandemic.

“We made sure they were in good health, knew that TCU was looking out for their financial well-being and that options existed if they needed assistance in getting out from under bills,” Alcorn said. “Many of our members said they were grateful to hear from us.”

In late April, the Indiana Bankers Association reached out to member banks to collect small business success stories, based on PPP loans.

Among them was an April 29 tweet from American Community Bank of Indiana in St. John: “Despite an overwhelmed SBA loan portal, our team worked all night until the wee hours of the morning to secure the help our businesses need! Bank totals for the PPP (to date) are: Over $18.7 million in aid for 213 businesses, preserving 2,317 jobs!”

Bankers knew how important the PPP loans were for the customers who received them.

The sentiment among loan recipients was, “Without this, we’re doomed,” Campbell said.

Mayers said many borrowers stated the program “literally saved their businesses.”

For 1st Source, just about 3,300 PPP loans were processed by mid-June. In the first round, the average loan size was more than $200,000, while in the second round it was “quite a bit smaller,” about $50,000 to $60,000, bringing the overall average loan size to about $180,000, Mayers said.

“Larger customers realized the value and benefit of this program early on,” Mayers speculated.

At Horizon, the average loan size was about $120,000 across Northwest Indiana, Kuhn said. The bank helped small companies as well as larger ones.

“We did loans as small as $1,000, for instance and some even lower,” Kuhn said.

CPA Curtis Whittaker, partner with Whittaker & Co., said 40 to 50 of his clients were able to pursue PPP assistance.

“Before the final rules came out, our firm was proactive in reaching out to a number of institutions,” Whittaker said. Even though the rules weren’t finalized, Whittaker developed a relationship with Centier.

“Typically, in economically stressed communities, they are often left out of what’s happening globally,” Whittaker said. “We tried to get in front of that narrative.”

He went on a local radio station to alert clients to what was happening with the loan program.

In some places, larger banks were cherry-picking which clients to serve first — the larger the loan, the more fees the bank would get. So smaller businesses and economically distressed communities of color were often pushed aside.

That scenario wasn’t the case with Centier. It helped some clients who were turned down by other banks, Whittaker said.

“We were ahead of the game,” Whittaker said. “It just helped that we had that conversation ahead of time.”

Centier, unlike many banks, agreed to take on all comers, not just existing customers. The bank required information on payroll and income tax returns.

“If we had everything, we had a turnaround time that was very quick,” Whittaker said.

Keeping the doors open

Big Daddy’s BBQ was one of the first Centier clients to receive a loan, thanks to Whittaker’s help. The restaurant’s loan application was submitted on a Friday and approved that Sunday, one of the bank’s first two PPP loans to be approved.

Commercial lenders rushed to get the aid to clients as quickly as possible, but their rescue work isn’t completed.

“We’re kind of only at halftime in this whole process,” Campbell said.

Many PPP loan clients still need to apply for forgiveness for some of the loan proceeds, which will be backed by the SBA.

Lenders also offer financial advice to employees to help make sure they can survive in the changing market conditions created by the pandemic.

“It bought them time. It gave them some time to have some working capital and keep people on the payroll” while they figure out the new normal, Mayers said.

Banks are agreeing to deferred loan payments to assist businesses, especially those in industries like hospitality and tourism that have been hammered by the pandemic. Lenders want to work with them.

“Let’s make a new plan,” Mayers said. “Let’s set up some cash-flow projections. “

Of course, borrowers are ultimately responsible for their own finances and decisions. Many businesses aren’t out of the woods yet.

“For the most part, our customers have treated these dollars as a safety net,” Mayers said.

That’s where banks aim to excel — at maintaining relationships with clients.

“Banking is relationship driven,” Kuhn said. “We know our customers well. They rely on us for assistance and advice.”

Horizon did specific outreach to underserved customers in Lake, La Porte and Marion counties to make sure they knew about PPP loans and were able to apply for them, Neff said.

As with everything else about the pandemic, it seems, the scramble to loan PPP money was unprecedented.

Van Til likened it to “flying a plane while it was being built.”

Campbell has lived through other financial crises during his financial services career — when the dot-com bubble burst and the Great Recession, for example. The pandemic, however, was worse than those; the financial troubles spanned all sectors of the economy.

“I’ve never seen it happen to this degree,” Campbell said. “The waterfall effect was unbelievable.”

As of June 12, the SBA reported Indiana banks assisted in completing 75,183 loans totaling almost $10 billion for Hoosier small businesses, Van Til noted.

“On top of this tremendous workload related to PPP loans, bankers also were dealing with an increase in mortgage loan applications and refinancing due to historically low interest rates,” Van Til said. “It definitely has been a busy time for banks, which remained open as essential businesses throughout the quarantine.”

More than loans

Banks have assisted the public as well as clients during the pandemic.

Horizon, for example, donated more than $270,000 for coronavirus-related relief in communities the bank services, Neff said. Most of that was through agencies like the United Way, food banks and the Urban League of Northwest Indiana, he said.

Bankers say they learned many lessons from this pandemic and the PPP program.

Certainly, there’s no replacement for knowing your customer, but technology is also critical, Kuhn said.

“We never envisioned this, so who knows? Stranger things can happen,” he said.

Click here to read more from the August-September 2020 issue of Northwest Indiana Business Magazine.