This report provides an overview of what small businesses are concerned with in terms of financial resources and what services or products are being offered at four banks. Small businesses are currently concerned most with losing eligibility for forgiveness from Payroll Protection Services, finding funds to expand and invest now that they mostly believe they will be returning to business as normal, and liability for spreading COVID-19. PNC has the most information available about the services and waivers it is offering to small businesses; it is focused on promoting its Merchant Services product. Chase is encouraging new customers to open business checking accounts. Capital One is focused on its Spark Business card, and Wells Fargo is offering fee waivers, payment deferments, and financial assistance through its Opportunity Fund. Full details are provided below.
Part (A): This section provides insights on the leading financial concerns of small businesses.
Payroll Protection Plan Comes with Concerns
- In response to COVID-19’s impact on small businesses, the federal government launched the Payroll Protection Plan (PPP). Businesses received “loans” that would be completely forgiven if certain qualifications were met. If they weren’t met, the business is obligated to replay the loan at a 1 percent rate. Additional complications in the changing terms of the PPP have caused businesses to be concerned that they won’t have their loans forgiven, adding to their already-significant financial stress.
- Businesses were initially informed that the 8-week period covered by PPP begins as soon as the loan is disbursed. Furthermore, only 25 percent of the loan can go to payroll costs. With many businesses not open (and thus not generating payroll) and many employees already laid off, this put many borrowers in the realm of not qualifying for forgiveness.
- An early June LendingTree survey shared that “many” small businesses are worried they won’t qualify for forgiveness, leading to concerns over cash shortages.
- Change of terms: The federal government passed the Paycheck Protection Program Flexibility Act of 2020 on June 4, extending the length of time businesses have to spend the loan to 24 weeks from eight weeks and adjusting the ratio of required spending to 60 percent for payroll costs.
- Size of impact: 4.5 million loans from businesses with fewer than 500 employees received $510.8 billion as of June 4, leaving $120 billion still available at that time.
- Size of impact: 63 percent of businesses applied for PPP; of that number, 44 percent had been funded by early June.
- Industries impacted: The industries that are predicted to receive the most in PPP in the first wave of funding (involving 1.3 million businesses) are professional, scientific, and technical services ($114,043,000,000), health care and social assistance ($99,848,000,000) and construction ($85,133,000,000), according to an analysis by a team from the University of Chicago (a table with the full breakdown by industry is available in the document as Table 4).
- Size of businesses impacted: According to SBALenders, businesses with more than 200 employees were three times more likely to receive loans than businesses with 15 or fewer employees.
- Based on this information, even with the new requirements, businesses that received PPP but do not qualify for forgiveness may need additional financial help. This would drive demand for flexible loans.
Small Businesses are Looking Ahead to the Future
- Small businesses have begun proceeding with planned investments or expansions, according to a small business study conducted by Thryv in conjunction with America’s Small Business Development Centers (SBDC).
- The Thryv study has been conducted for 13 weeks. The most recent study, release June 8, shows that the number of businesses who have not or are not planning to delay investments has risen from a steady weekly average of 40 percent to 59 percent in a single week.
- 49 percent of businesses are now anticipating they will make a full recovery within a year, revealed the Thryv study. The previous low was 21 percent in weeks 5 and 6.
- Week 13 was the first week whenno small business said they would not survive in some capacity for the next 12 months.
- Size of impact: 18,113,000 small businesses are not delaying or planning to delay investments and expansion. 15,043,000 small businesses believe they will have a full recovery in a year and they can proceed business-as-usual.
- Industries impacted: The fastest growing industries for small businesses are construction, home health care, personal care services, and facilities support services. New and existing businesses in these fields may be looking for loans to expand their presence in the industry.
- With such a significant amount of businesses expanding and anticipating a return-to-normal within a year, the need for access to funds (such as loans) will increase.
Research Strategy:To calculate the size of the impact, the following calculations were performed:
- In 2019, there were 30.7 million (30,700,000) small businesses in the United States.
- 59 percent of that number is 18,113,000 (30,700,000 x 0.59 = 18,113,000).
- 49 percent of 30,700,000 is 15,043,000 (30,700,000 x 0.49 = 15,043,000).
Small Businesses are Concerned with Liability Related to a COVID-19 Infection
- Small businesses are widely concerned that they would be liable for a lawsuit if a customer alleged that they got a COVID-19 infection on their property, according to a U.S. Chamber and MetLife Small Business Coronavirus Impact Poll released in early June.
- Size of impact: 67 percent of small businesses with between 20-500 employees are concerned about lawsuits related to contracting COVID-19, the U.S. Chamber and MetLife poll found.
- Size of impact: 51 percent of small businesses with 5-19 employees are concerned about lawsuits related to contracting COVID-19, the U.S. Chamber and MetLife poll found.
- Industries most impacted: The concern about the effects of a second wave of COVID-19 also remain high, with 32 percent of small businesses reporting they are “very concerned” in the Thryv survey and 27 percent being “somewhat concerned.”
- Unless small businesses receive temporary “safe harbor” protection from liability, this will be an ongoing concern, particularly if a second wave prolongs the length of impact for COVID-19. As such, offering liability protection or finding someway to offset liability vulnerability for business customers (such as through specialized loans) would be advised.
Part (B): This section provides an overview of products or services being offered by banks to provide financial assistance.
PNC’s primary focus is on its Merchant Services program; beyond that, it is offering financial relief to small businesses via direct and indirect support.
- PNC is boosting enrollment in its Merchant Services to small businesses during this time by offering a bonus of up to $400 for new customers through June 30.
- As part of its relief program, PNC announced it will not be adversely reporting to credit files when businesses access relief and emergency relief funds through small- and medium-sized business loans, including funds provided through the CARES Act.
- PNC made a low-rate loan of $5 million to Bankable to expand access to PPP loans in under-served communities.
- PNC is actively distributing funds from the CARES Act and PPP as an extension of the Small Business Administration loan program.
- Small businesses who are unable to make their loan, line of credit, or credit card payments have “a range of modification options” available to them with no late fees applied.
- To help small businesses who are impacted by overdraft and monthly service fees for deposit accounts as a result of clients canceling payments, PNC is working with each small business on a case-by-case basis.
- All the resources associated with PNC Merchant Services are being leveraged to help small business clients. Included in this are the proactive waiving of account and service fees for March and April.
- Small businesses who participate in Merchant Services will have an extra billing cycle to qualify for the Q1 2020 $500 reward for reaching $10,000 in transactions.
Chase’s efforts to provide business relief focus on existing products and modifying their usual operations to make them more helpful to businesses in need. They are focusing on promoting their business checking account. In addition, their parent company, JPMorgan, made a targeted donation to small businesses.
- Chase is actively distributing through the PPP program.
- To keep business customers apprised of PPP forgiveness changes, and to apply for forgiveness, Chase is operating a specific site.
- Chase has raised its Quick Deposit limits for small businesses, though it does not specify what the new limits are.
- JPMorgan made a donation of $8.5 million to highly impacted and vulnerable small businesses.
- In March, Chase was focused on promoting its Ink Business card with an offer of 80,000 bonus points for new accounts.
- A recent Chase ad targeting business owners focuses on its Total Business Checking account.
Capital One’s assistance for small businesses is limited to modifying services and products for existing customers and managing the PPP program. It does not advertise what relief is involved, but instead encourages individual businesses to contact them directly. The two ads found related to business customers included a generic ad and a Spark Business credit card ad.
- Capital One stopped taking applications for PPP on June 18 and is now working on processing the applications it has received. This is the only program, product, or service referenced on their website for business assistance during COVID.
- Customers who hold the Capital One Spark Classic for Business may be given more time to pay or have their fees waived on a case-by-case basis.
- Capital One has advised Forbes that all of its customers will be eligible for some kind of assistance, and that the type of assistance received will depend on the product the customer has.
- Potential relief from Capital One for existing customers includes: minimum payment assistance, deferred loan assistance, and fee suppression.
- Capital One ran a generic ad for business banking from Oct 2, 2019 to April 3, 2020.
- Capital One Spark Business ran an ad for 200,000 bonus miles and 2x miles for any purchase from January 9 to February 23 for new customers with the Spark Business card.
Research Strategy:An image of the Spark Business ad couldn’t be linked directly to the report due to it being an HTML ad.
Wells Fargo is offering financial assistance to existing customers, along with handling small business loans and PPP loans.
- Wells Fargo has been a participant lender in the PPP program, though it announced in early May that it is under formal investigation by federal authorities for its lending practices with the program’s funds.
- Wells Fargo is giving options for “fee waivers, payment deferrals and other expanded assistance” to its customers who contact them, including business customers.
- Wells Fargo will be launching a PPP Forgiveness Center soon to enable PPP recipients to keep up to date with requirements and to file forgiveness applications.
- The PPP and Small Business Loans are the only forms of assistance mentioned on the COVID-19 financial assistance page for small businesses.
- Wells Fargo launched the Opportunity Fund to provide direct assistance to certain small businesses. The Opportunity Fund provides a total of $50 million in assistance for small businesses, particularly those owned by women, immigrants, and people of color.