The Paycheck Protection Program (PPP) showed many credit unions that the right technology is critical to serving business members efficiently when they urgently need help. It also showed credit unions how technology can cultivate big growth in new business member relationships and interest-earning assets that diversify the portfolio.
How the PPP + technology means MBL growth and more for credit unions
- Credit unions participating in the Paycheck Protection Program (PPP) found that the right technology helped them serve business members when they needed help and also gain new members.
- Technology that makes it easier to meet credit union members’ ongoing needs also will factor importantly into growing relationships beyond the pandemic and economic crisis.
- Technology can facilitate delivery on credit unions' brand promise of relationship-based services.
CUs came through for businesses in PPP
Indeed, with in-person contact between members and staff prohibited by stay-at-home orders during the pandemic, credit unions relied on online loan applications to collect information from the deluge of prospective borrowers who sought funds in the first round of PPP funding. Secure online portals allowed PPP loan applicants to upload required documents, and many credit unions finalized borrower applications with electronic signatures. Finally, having the ability to upload applications automatically and in rapid-fire succession to the Small Business Administration’s E-Tran loan-origination system was vital, given the problems users reported with the E-Tran system.
Credit unions like Telhio Credit Union in Central Ohio had employees working around the clock to help with PPP loans, and they used an SBA lending solution that automated the origination process, as well as the forgiveness and administration phases. “When the program opened on April 3, many hopeful borrowers were frustrated and disappointed by the lack of participating financial institutions in the program,” the company said in a news release in April. “Telhio Credit Union, on the other hand, was quick to respond to the program and welcomed all businesses to begin applying for the program.”
Through July 1, Telhio Credit Union had disbursed about 470 PPP loans totaling more than $35 million. A significant number of those were from new members. Through June 24, the credit union had gained 278 new members via the PPP. Being able to collect applications, required documents, and borrower signatures without in-person meetings allowed the financial institution to scale its operations – ultimately benefiting more business owners in the community.
Using PPP technology “enabled us to support the high volume of interest in the loans and streamline and automate key processes to get capital into the hands of small business owners more quickly,” Derrick Bailey, Telhio’s Chief Sales Officer, has said.
Like some of the other lenders that found success in the PPP initiative, Telhio Credit Union was already an SBA lender before the Paycheck Protection Program was launched. In fact, it was Ohio’s top SBA lender among credit unions. But historically, SBA lending and member business lending isn’t a major focus among credit unions.
Only 3% of credit unions were active lenders in the SBA 7(a) program in fiscal 2018, originating 1.2% of all approved loans in the program. The guaranteed portions of SBA loans (i.e., 100% for PPP loans) don’t count against the 12.25% limit on a credit union’s net member business loan balances to total assets. Nevertheless, net member business loan balances in the first quarter were only 4.9% of total assets, according to the NCUA, down from 5.0% in the fourth quarter. (Real estate loans were 34.7% of total assets in the first quarter, and auto loans were 22.8%.)
However, many lenders without prior SBA lending experience were able to perform well in the PPP, Collier Wright, Abrigo’s Senior Solutions Consultant, noted during a recent webinar on executing business member strategies in an increasingly competitive and uncertain lending environment. Those credit unions performed well, Wright said, because they leveraged the domain knowledge of a technology partner that had been working in the SBA lending technology space already.
When the second round of PPP funding ended June 30, more than 700 smaller credit unions (those with less than $1 billion in assets) helped business members access loans totaling about $3 billion, according to the SBA. (The SBA didn’t break out larger credit union PPP lending activity.) Among all 5,459 PPP lenders, more than $520.6 billion in loans had been approved.
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Technology like PPP automation that improves the credit union’s ability to serve business members quickly and efficiently certainly plays a major part in gaining new members. But technology that makes it easier to meet members’ ongoing needs also will factor importantly into growing relationships beyond the pandemic and economic crisis.
For example, digital customer relationship managers, or CRMs, allow credit unions to blend their hallmark relationship banking practices with improved efficiency. Many credit unions have plenty of data on their members and prospects, but they’re unable to organize and capitalize on that information to offer new products or to save time for members because of how it is stored.
Using a relationship manager helps a credit union capture member and prospect information consistently and efficiently to provide a 360-degree profile of their relationships. The centralized data enables highly personalized or segmented communication and outreach for cross-selling, up-selling, and retention that would be extremely time-consuming without automation. A digital CRM also ensures efficient or automatic completion of staff tasks that are labor-intensive but critical to good member service. These tasks include:
- Documenting email exchanges between members and staff
- Sending calendar invitations
- Inputting data
- Generating daily activity reports
- Creating pipeline reports
Other digital tools that improve the member experience can help credit unions capitalize on the goodwill many of them earned during the PPP while some larger financial institutions declined to serve customers without existing lending relationships.
For example, automation can pre-populate certain member information in an application for a new business loan or credit card. “Our brand promise as credit unions against larger institutions is that we know you and we care about you,” Wright said. “If I already had your data and I provide you an application and it doesn’t already have all of the information there you have on me, it doesn’t look like you know me and that you care about me.”
Credit unions aiming to capitalize on the number of new members gained through the Paycheck Protection Program should continue to evaluate their technology and platforms on the basis of whether they meet the needs of business members and institutional strategies to provide superior member service.