Why the SBA Paycheck Protection Program will change business lending forever
Until this March, your typical small business owner could run their entire life from their smartphone. The one exception: their business banking relationship. That experience had not changed since the advent of email and, in some cases, the fax machine. If that small business needed to apply for credit, update financials, or make a draw request, then fax, email, or physically showing up at a branch was the primary and most effective method. No other part of their life worked in this fashion. That all changed with the SBA’s Paycheck Protection Program.
The COVID crisis and the urgent PPP opportunity
The combination of urgent needs and social distancing requirements made many of the antiquated procedures associated with business lending impractical, if not impossible. Business members needed those loans immediately, and credit unions needed a means of receiving online applications, performing online reviews, and issuing credit online, while working remotely at speed and scale. Many credit unions responded to this crisis by putting into place tools, technologies, and procedures that enabled them to meet this member need. Given the narrow scope of the PPP combined with the digital knowledge that already supported modern consumer banking experiences, for many credit unions this crisis-response entailed only a small investment in specialized PPP software.
Once credit unions modernized their lending processes for PPP loans, their small business members could submit online applications, deliver supporting documentation, and information into online datarooms (with audit trails), all the while allowing various credit union staff members to review applications and fund loans — all of it performed online, remotely and efficiently at scale with information and timely updates being communicated to members. This SBA PPP experience was fundamentally different from all prior business lending experiences with their credit union even if natural and expected in the consumer world for these business members.
No going back…
Business members that have experienced this online solution are not going to understand why they need to return to antiquated ways of doing business banking once the crisis is behind us. Rightfully so, they will expect that if a credit union can execute in an all-online environment during a crisis, provide strong member communication, and have access to information in real-time, then surely a credit union can do the same during normal times.
Credit unions that want to win business banking and grow will have no alternative but to provide small business borrowers with a modern digital experience for originating and servicing loans. The inefficiencies that were tolerated in large part due to inertia, as well as an excessively cautious approach to modernization, will no longer suffice. Simply put, the question of whether credit unions can deliver a modern digital commercial lending experience has been answered. Now, credit unions will need to rise to the occasion across all commercial and business banking. PPP cannot be and will not be a one-off experience. There is no going back.
What this means for credit unions moving forward…
Credit unions now enter the future having demonstrated that their organizations are ready to deliver a fully digital lending experience, knowing that small businesses will expect it. What’s still required is investing in enabling technologies that can support that process for a wider variety of commercial loans. Given the positive economics of small business lending, this technology decision will receive renewed attention. Gone will be the status quo bias and inertia that can frequently delay investments. Even capital constrained budgets can leverage SaaS-delivered solutions with volume-based pricing that integrate easily, and at low cost, with any technology stack. Once such new software is adopted, credit unions will immediately be able to efficiently deliver a modernized commercial lending experience to their small business members, gain greater market share and grow just as they successfully accomplished during the SBA’s Paycheck Protection Program.
