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The unprecedented volume of crisis loan applications is shifting lender-borrower relationships, as community banks establish lending relationships with small business owners who struggled to receive financial support at bigger banks.
The largest banks in the U.S., those with a nationwide footprint, had to reserve their services for businesses with an existing lending relationship or business account due to the unprecedented number of Paycheck Protection Program loan applications received. By contrast, local community banks expanded their services to take on borrowers in their microeconomy who never banked with them before.
Wells Fargo emailed customers telling them they may want to apply elsewhere for the PPP “to increase [their] chances of receiving a loan before the funds run out.”
That left options limited for Lehigh Valley-based business owner and Wells Fargo banker Darla Malik, since other leading banks, such as Bank of American and J.P. Morgan Chase only accepted applications from businesses with existing lending relationships.
Malik, owner of Advanced Chauffeur Services in Macungie, said she was able to apply for a loan through American Bank, an Allentown-based community bank.
“American Bank did not ask me to become a banking member, except for opening up a checking account would be required to get the funding,” Malik said. But I didn’t need to already be a customer in order for him to assist me. Not only have they been assisting me but he’s been very caring about it.”
Community banks have a direct incentive and obligation to support their local economic footprints, said Centric Bank President and CEO Patti Husic.
“The success and health of our small business community is a top priority,” she said. “We pride ourselves on financing new frontiers and supporting and strengthening Main Street and the job creators.”
Orrstown Bank officials said in mid-April the bank expects to close 1,500 PPP loans, making for a total of $370 million, earning the bank $9 million of processing fees.
“We are focusing, number one, in our geographic footprint, and we are servicing clients that are referred to us by the community,” said Luke Bernstein, executive vice president and chief retail officer of Orrstown Bank. “If someone in the community reaches out to us and needs help and they’re not a client, we’ve been helping them.”
Todd Stumpf, owner of two Rita’s Italian Ice locations and two car wash services in Lancaster County, said he only had a small percent of his financial assets with Orrstown Bank. Now, he plans to expand his relationship with Orrstown. He was impressed by the Shippensburg-based lender’s proactive client services.
“We’ve got relationships with a bunch of the different banks in central Pennsylvania, and Orrstown is the only one that reached out to me,” Stumpf said. “Even the one bank I did reach out to didn’t even get back to me. They [Orrstown Bank] are not a huge bank but helping out a small guy like me and taking the time and reaching out to do it was just really helpful in getting these PPP loan forms submitted.”
Mike DiSante, owner of the Philly Pretzel Factory in Camp Hill, chose to work with Orrstown Bank on his PPP loan to pay employees and rent costs during the ongoing pandemic. Orrstown Bank helped him through a convoluted loan application process, he said, noting that he had to start the process over again and fill out forms multiple times as the SBA sent out daily guidance updates during a hectic first week.
“I might have had to sign the same form five different times as it changed, but at least I knew my stuff was ready to go and I wasn’t waiting to get my information after the fact,” he said.
DiSante’s only prior interaction with Orrstown occurred about three months earlier when he applied for a loan for a real estate project. The bank declined because lenders believed it wasn’t a good use of DiSante’s resources.
“That was the first bank in 10 years that ever really sat down and said, ‘We don’t like this because we’re looking out for your best interest,’ versus just not giving me the loan for whatever reason,” he said. “That kind of stuck in the back of my head, and when these programs started coming out, I put out my feelers out for all my contacts and Orrstown Bank was the most proactive.”