As many small businesses struggle to navigate the COVID-19 pandemic, financial institutions have an opportunity to step in and extend a lifeline to small business owners, many of whom are relying on their financial institutions to provide resources, insight and stability.

By proactively reaching out to small business owners, instituting provisions to provide them relief, and connecting them with local, state and federal programs, financial institutions can make a meaningful difference now and create long-term loyalty among small business accountholders.

Running a small business and managing cash flow can be a challenging endeavor even in normal circumstances. In the Raddon 2019 survey of 1,200 U.S. small business owners, 29 percent reported being mentally fatigued and feeling exhausted most of the time. Also consider:

• 59 percent of small business owners felt they work more hours than they would have if they had chosen a different career path
• 58 percent agreed that running a business is very challenging and difficult
• 41 percent did not have much personal free time due to the commitments involved in running a small business
• 33 percent felt that owning a small business has had a negative effect on their personal life

Despite these challenges, most small business owners wouldn’t have it any other way. When surveyed last year:

• 81 percent said they were very satisfied with their decision to start their own business
• 72 percent felt that owning their own small business was more fulfilling than other career paths
• 70 percent would encourage their children or other family members to also start their own business

Small business owners recognize the inherent challenges involved in what they do, but these are outweighed by the benefits. It’s this entrepreneurial spirit that will help small businesses eventually enjoy a strong rebound after the current crisis. But they will need help, and there are several ways in which financial institutions can assist.

Be Proactive with Communication

As you continue to build out and modify your communication plan, messages to small businesses should detail the resources you can offer. Senior leadership should be involved in the communication to the entire base, along with direct outreach from your commercial lenders and small business specialists to help prioritize and triage the needs of your current clients and offer them assistance before they seek alternate solutions. Messaging to small businesses should include help in downloading apps, using remote deposit capture, and loan application assistance. The communication plans highlighted in earlier Raddon Report articles apply to small businesses, as well.

While targeting messages to your existing small business clients, don’t neglect your retail consumer base. Raddon Research Insights data shows that major banks are cited as the primary financial institution (PFI) by 70 percent of small businesses but are the PFI for only 40 percent of the general consumer population. Collectively, community banks and credit unions control 40 percent of consumer PFI relationships but only 16 percent of the small business PFI share.

The implication is that many small business owners in the retail base use the community financial institution for their personal banking needs, but they turn to a major bank to fulfill their small business needs. Broadcast the efforts you’re taking to help small businesses in your community to this group. While your existing commercial and business clients should be the top priority in terms of messaging about business services, the rest of the account base should be aware of the support you’re extending to businesses in your community.

Highlight Resources Available

Financial institutions should familiarize themselves with the assistance for small businesses created through the Coronavirus Aid, Relief and Economic Security (CARES) Act, and be prepared to help small businesses navigate the various resources available. A few key resources include:

• SBA Economic Injury Disaster Loans (EIDL) provide working capital loans up to $2 million, with loan advances of up to $10,000 being made within three days of a successful application (The loan advance portion will not have to be repaid)
• The SBA Paycheck Protection Program provides small businesses with funds to pay up to eight weeks of payroll costs, including benefits. Funds can also be used to pay interest on mortgages, rent and utilities. If employers maintain their payroll, the loans will be forgiven
• The SBA Debt Relief program provides relief to small businesses with non-disaster SBA loans, covering all loan payments on these SBA loans including principal, interest and fees for six months
• SBA Express Bridge Loans provide up to $25,000 to small businesses with a current relationship with an SBA Express Lender, expediting access to emergency funds with less paperwork
• The Employee Retention Credit is a refundable tax credit aimed at helping businesses keep employees on their payroll. The credit is available to all businesses regardless of size that have been financially impacted by COVID-19, and it covers up to 50 percent of up to $10,000 in wages

There are countless other state and local grants and resources being made available to assist small businesses during the pandemic, and a partial list is available. Continue to monitor resources from the SBA as new additions and changes occur frequently

Other Ways You Can Help

Other initiatives that financial institutions are implementing to help support small business include:

• A 90-day no payment window for small business loans, with no fees or late-payment reporting to credit bureaus
• Creating special emergency loan products. One example we’ve seen for how these emergency loans are structured is interest-only payments for the first year, with 0 percent interest for the first six months and a 4 percent rate for the next six months before converting to a 6 percent rate for the remaining seven-year term
• Special call center lines for business clients with earlier and later hours to accommodate business owners
• Virtual networking opportunities for small businesses to provide both support and to generate ideas on how to adjust business operations during the crisis
• Encouraging debit and credit card users to support local businesses by offering a reward incentive. Remind cardholders that digital gift cards can still be purchased from businesses forced to close their physical storefront
• Reaching out to businesses using merchant card services to suggest ways in which the institution can support them, such as encouraging more contactless payments or removing signature requirements
• Identifying businesses that have not downloaded or have downloaded but not activated tools such as mobile banking. Have employees that are equipped to help download and set up online tools to assist this group of nonmobile users

Your Online and Digital Tools Are on Display

Now more than ever, your online and mobile banking tools will be front and center as social distancing becomes the norm. The Raddon research that showed 70 percent of small businesses use a major bank for their primary financial institution also revealed technology is a key driver in the selection of a financial institution. In fact, 24 percent of businesses using a major bank indicated they would be extremely likely to switch to a community-based institution if the technology offered was perceived to be the same. Of course, that doesn’t mean a major overhaul of your website is required today, but you should continue to highlight the digital tools that you do have available and aim to make loan processes as easy as possible.

In the same Raddon survey of small business owners, 47 percent agreed that getting a business loan is a long and difficult process. Four out of 10 also felt it was easier to obtain financing through an online lender. In many ways, the value proposition of online lenders was built for a situation like the current crisis, with the promise of an easy application, quick decisioning and immediate funding. Making the loan process more efficient should be top of mind for traditional lenders, both during and after the crisis.

Opportunity for Retention and Growth

Small businesses are the economic drivers of our communities. Helping small businesses through these difficult times will help ensure they are ready and able to play a role in our collective economic recovery from the COVID-19 pandemic. The current crisis is an opportunity for financial institutions to step up when it matters the most to help small business clients. Not only is it the right thing to do, but it will also position your financial institution for future business growth after small businesses emerge victorious from the current challenges.