Coronavirus: What it Means for Commercial Banks & Small Businesses

COVID-19: Effects on Commercial Banks & Small Businesses

It’s hard to even think back just a few short weeks ago when businesses across America were booming, the stock market was experiencing record highs and consumer confidence and spending was outstanding. In fact, U.S. businesses confidence was the highest it had been in more than a year. As reported March 1 from the Wall Street Journal and their advisory company Vistage Worldwide, they completed a survey of 668 small businesses from February 3 to 10 and found that the overall confidence index hit its highest point in 15 months. 

Now, just a few weeks later, that optimism has been compromised by the jolted stock market, breaks in the global supply chain and an overall uncertainty created by the coronavirus disease. Regardless of their size, small businesses still need to take care of their employees and their customers. Some are worried about their ability to do so in the manner that their clients have been accustomed to. Questions on if suppliers will still be able to ship goods on time, if customers will cut back on spending, if employees fears will cause them to lose work time, and what a slowdown in business can do to a cashflow are all top of mind as businesses navigate the situation surrounding the coronavirus.  

From a regulatory standpoint, the coronavirus outbreak has prompted the Federal Reserve and other agencies to look at what tools and actions they could deploy if the banking system faced heightened risks. While not as likely as when it happened during the the 2008-2010 financial crisis, regulators are looking at tools such as allowing loan forbearance and backup services if facilities or staff are affected. One such response from the Federal Reserve was to address the “evolving risks to economic activity” with a dramatic 50-basis point interest rate cut on March 3.   

As banks and other businesses assess business continuity planning and testing pandemic response scenarios like working from home arrangement for non-essential customer facing employees, the question becomes: What can commercial banks do to help their small business customer during this crisis? 

One thing for sure is that commercial banks absolutely rely on small business for their largest source of income, net interest income from loans, and they need to continue to make good loans to small business to keep the economy growing. While forbearance or helping troubled clients is needed, banks still need to provide growing companies with the funding they need to thrive. One way they can do that is by providing tools that give their customers quick access to loan decisions and better processes to approve and fund those loans while still managing risk. Using tools such as a small business loan origination solution empowers banks to process applications, support multiple decision strategies and process business loans quickly; thereby lowering the cost for banks and creating an outstanding customer experience. The ROI in using these types of tools is a winwin for the banks using the tools as well as the businesses getting quick answers and obtaining the funding they need to grow and keep the economy booming, even in the midst of a crisis. 

Small business customers look to their local banks to help them maintain confidence in their business and assist them with their loan and deposit needs so they can thrive. To that end, banks need to have partners in their business to help them thrive, even during a crisis. By investing in a good technology partner, your employees and your customers can help keep our economy growing, thriving, and maintaining through a crisis.


Need Additional Resources?

You might also like:

Coronavirus Impact on Banking: Wall Street vs. Main Street

The Keys to Portfolio Risk Management During a Pandemic

Why a Special Assets Officer Could Be Key to Surviving an Economic Downswing