For example, many banks and credit unions that participated in the Paycheck Protection Program (PPP) during a time requiring remote work implemented digital technology for originating PPP loans and processing forgiveness applications under extremely tight deadlines. Nearly universally, community financial institution PPP lenders have reported winning new business customers as a result of their help during the PPP. Now, they are focused on expanding those relationships.
“There have just been dozens and dozens of stories of us landing relationships, and in multiple cases, it’s relationships that are several million dollars,” Brian Plum, CEO of Blue Ridge Bank, told an audience at the ThinkBIG conference in September. “For us, these are sizable, meaningful relationships.”
Financial institutions also spent money on technology to enable accepting smaller-dollar business loans profitably or to open retail or small business deposit accounts online. Indeed, Bank Technology’s 2020 Technology Survey found 65% of respondents implemented or upgraded technology to serve customers’ needs or enable remote work as a result of the COVID-19 pandemic. A similar percentage reported having increased their technology budgets.
Among those that boosted budgets and implemented technology, 35% focused on digital loan application technology, and 32% boosted technology for digital deposit account openings.
Positive signs in recent lending data
As the PPP frenzy winds down, some of those same business borrowers will undoubtedly request additional funds from their new lenders to bridge the uncertainty. Meanwhile, businesses that flourished in the pandemic may look to expand operations. Cleaning and delivery services, liquor and wine stores, fitness equipment companies, gardening suppliers, and used car sellers are among businesses that have thrived during the pandemic and may be targets for new loans.
In fact, the decline in commercial and industrial loans moderated during the fourth quarter and ticked higher in February, according to Federal Reserve data. Some bridge lenders are already seeing renewed interest in commercial real estate, one of the hardest hit lending areas last year. Mark Jarrell, head of Greystone’s Portfolio Lending Group, said recently in a company blog post that he expects a normal pace of CRE investment activity in 2021, as well as a boost from activity that has shifted from 2020 into 2021.
“Some of this optimism comes from the perception that there’s a light at the end of the tunnel,” Jarrell said. “We’re not as in the dark about what’s happening, such as what it will cost to operate senior housing post-COVID-19. Things have settled down in the multifamily space, too, especially in the secondary and tertiary markets where garden apartments, in particular, have survived well.“
Other loan programs provided by the Small Business Administration (SBA) could also generate some activity for lenders that have not historically pursued SBA loans.