Small businesses are hurting. Our survey shows how banks can help.

As COVID-19 continues to affect the global economy, many banks are beginning to navigate from crisis response to a longer-term, post-COVID-19 outlook. The US megabanks, the regional powerhouses and the community banks are grappling with how to support small business owners during the crisis and through to the eventual recovery.

PwC’s survey of small businesses suggests that these businesses are often loyal customers that may just need to be guided back to success.

We recently asked a group of these companies how they were coping, and what help they needed from their banks. The PwC survey, conducted from April 3 to 19, 2020, included 469 small businesses across the United States. In general, these small businesses were complimentary toward their financial institutions, but they were also worried about the future and looking for more support. For banks, this is recognition that their outreach has been working—but there’s likely still more for them to do.

Key information on companies in the survey

  • 31%

    of the companies have been in business for more than 20 years

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  • 86%

    operate from a single site

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  • 55%

    have less than $499,000 in revenue

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  • 62%

    have only 1-4 employees

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Small businesses are reeling

Our survey results suggest that a large portion of the small businesses across the US have been severely affected by COVID-19. Nearly three quarters (72%) of the owners said their operations have been partially or fully affected by the crisis.

Many of these small businesses operate on thin margins, without much of a cash cushion. Nearly half (48%) expressed concern that they may need to suspend operations completely if the business shutdown is prolonged. More than half (57%) of these business owners said they were concerned about being able to continue paying salaries to their staff, and nearly as many said they are worried about their ability to pay bills. Without more help, a significant number of small companies may likely not survive. 

So far, small businesses have been largely satisfied with their banks...

Small businesses want to trust their primary bank’s ability to support them during tough times. According to our survey, 81% feel their level of trust has remained the same—or even increased—since the beginning of this crisis. Many also feel their banks have kept them informed: In fact, 63% rated their banks' communications efforts to keep them updated during this crisis as very good or excellent. These measures indicate small business owners seem to be relatively satisfied with their bank’s response to the current situation.


Given your experience with your financial institution(s), has your trust gone up / down / remained the same in your financial institution’s ability to support you in your time of need?

My trust has remained about the same
%
My trust has gone up
%
My trust has gone down
%
Don’t have a perspective
%
Source: PwC FS Pulse_Small Business Survey
April 3 - 19, 2020: base of 469
Note: The sum of "My trust has remained about the same" (55.2%) and "My trust has gone up" (25.4%) equals 80.6% or 81% rounded.

...but they’re looking for more financial support and better customer service...

For businesses that are struggling, almost any financial relief would be welcome. Slightly more than half (55%) of the small business owners we surveyed said they would like banks to be more proactive in waiving basic fees such as late payments, overdrafts and other charges. A comparable number would like banks to provide access to low-interest business loans (49%) and to pause foreclosures, evictions and repossessions (48%).

Over 60% of our survey respondents just want to be sure the lines of communication stay open. Nearly two-thirds (64%) are looking for short wait times to speak with a business representative. Similarly, 63% would like to see no-hassle credit card processing, and 60% want banks to keep assistance options available to meet the business owners’ financial needs. These are indications of a customer segment that’s under stress.

…and if they don’t get the help they need, they may look elsewhere.

In general, small business owners are usually quite loyal to their banking relationships. Our survey found that 42% of these companies have never switched their primary bank, and another 31% last changed their primary bank at least six years ago. Only 7% switched their primary bank within the past year.

But these are not ordinary times. Now that many small businesses are facing revenue pressure, some are starting to scramble. For example, our survey results show that while small business owners typically turn first to credit unions (53%) and banks (48%) in their search for more working capital, some are thinking more broadly. Nearly half would look to waivers to save funds from current capital (44%), while 43% would turn to donations, crowdfunding or relief funds and another 43% would look into economic injury disaster loans. Some of these companies would even consider switching providers during the current crisis because of service issues: Nearly two-thirds (65%) said they might switch banks because their bank has no arrangements on teleworking. Similarly, 64% said that a lack of transparency on trust and relationships could lead them to choose a new provider, and 61% said the lack of personalized customer assistance could lead to a switch.


What might be the reasons which may drive you to switch your financial institution during the COVID-19 crisis?

No arrangements on teleworking
%
Lack of transparency on trust and relationships
%
No personalized customer assistance
%
Lack of availability on lines of credit
%
Less communications
%
Lack of responses on refreshing vendor interaction policies
%
Deferred revenue and net working capital
%
Source: PwC FS Pulse_Small Business Survey
April 3 - 19, 2020: base of 469

It’s too soon to know how, or even if, relief efforts such as the Payroll Protection Program or the Main Street Lending Program may affect small businesses’ attitudes toward their lenders. Many would agree that banks were asked to deploy large-scale programs with little guidance and very short turnaround. To the extent that borrowers may perceive the implementation as flawed, they might view lenders as possibly contributing to either the problem or the solution.

It’s even possible that some companies may start to explore alternative funding sources, such as FinTech providers, if they are unhappy with the service they’ve received from their primary bank. Even if many small businesses don’t switch providers, this experience could spur more competition in the sector. Therefore, the lessons we share below still apply.

1. Say it clearly and say it often

It’s good that 63% of small business owners rate their banks’ communication efforts as very good or excellent. But it’s not good enough.

If your customers don’t know or understand how you’re helping, this may indicate a bigger problem. Do your own team members understand the message? Do they believe it? What your customers see as inconsistent communication may be a key indicator of a bigger problem with your culture. Look for the root cause.

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2. Show empathy

Small business owners aren’t just mini versions of Fortune 500 companies. Often, these are hard-working entrepreneurs who have risked everything for their dream. When they worry that they might need to suspend operations, this is about more than just their business: It’s about their vision for the future. A little understanding from your bank may buy a lot of goodwill.

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3. Be the trusted advisor you’d want

Your customers don’t just need a loan. They need to understand their options: The Payroll Protection Program? The Main Street Lending Program? Deferments? Alternate sources of capital?

Many small businesses may have expertise in something other than finance, so they may not know how to apply for help, or even how to evaluate the options. How can you align your service delivery and your incentives more closely with what your customers really need?

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4. Use technology to personalize service at scale

Quickly scale up your use of videoconferencing and other online collaboration tools to help keep the conversation going. You may already have a variety of tools that can help automate routine work, freeing up your staff for truly personalized advice. For example, take advantage of the websites and apps that you’ve already built to deliver “low-touch” advice and support. Let your customers know where to look and what information they can find —whether that’s industry insights or business advice. Other options to do more with less include intelligent automation tools to help process requests quickly, and ways to rethink contact center workflows.

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5. You can’t help everyone

The sad truth is that in this environment, resources aren’t limitless. So, which firms should get funding? Which customers have long-term potential, but may need forbearance to get through this period? Which may simply default?

In many cases, you may already have enough data to make effective, objective decisions. How can you repeat this process, better, faster and inexpensively?

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Contact us

David Schiff

Principal, FS Digital and Customer-Driven Transformations, PwC US

Brian Morris

Partner, Financial Services Advisory, PwC US

Rahul Wadhawan

Principal, Strategy&, PwC US

Kurtis Babczenko

Banking and Capital Markets Advisory Leader, PwC US

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