October 2021 | Report

Small businesses’ trust in banks rose during COVID-19—here’s how they can keep it

Banks earned and kept the trust of small businesses amid the pandemic. We asked small business owners how banks can keep that momentum. Here’s what they told us.

Small businesses’ trust in banks rose during COVID-19—here’s how they can keep it

The stress test that the pandemic put small businesses through transformed their relationships with financial partners in countless ways. Some sought PPP loans to keep payrolls running. Even more relied on digital products and service delivery in a largely remote working environment. Banks were ready to meet that challenge, providing reliable services when small businesses needed them most.  

With the U.S. economy picking up, banks will have ample opportunity to deepen those increasingly digital relationships. Sixty percent of small business owners indicated they’re expecting revenue growth in 2021, according to a recent Bank of America report. Meanwhile, government support is ending and those who received PPP loans are entering the loan-forgiveness process.  

These headwinds prompt numerous questions for banks, many of which have struggled historically to effectively service small businesses—whether that’s due to disconnected legacy technologies, poorly conceived product offerings, or operating models and processes designed for larger customers. 

  • What exactly are the changing needs of small businesses? 
  • How can we better deliver digital products and services? 
  • Where are they most satisfied and dissatisfied with their current lenders? 

West Monroe surveyed 401 small business owners across a range of industries to find the answers to those questions. We uncovered three key takeaways and analyzed what banks can do next to optimize their small business offerings for a post-pandemic landscape. 

As COVID-19 ebbs, small businesses trust their banks more and are content with a range of services—in large part because banks successfully delivered on PPP and other loans. 

What’s next for banks

While nearly 80% of the 5 million PPP loans given out last year have been fully or partially forgiven, very few of this year’s borrowers have started the process. In the months to come, banks will have to work with their customers on these applications—or sign on with the SBA’s newly announced online portal, which small businesses that borrowed up to $150,000 can apply through for forgiveness.  

While this latter option might seem attractive, it poses its own risks: Some banks feel that switching  now could confuse some customers, while others are concerned with the SBA’s technology capabilities.  

Whichever route they choose, banks must take pains to ensure this process goes smoothly. Doing so will not only help maintain the trust they’ve built in providing the loans in the first place but will also help them capture new customers as small businesses look to rebound and new ones crop up at a record pace. 

Approvals may be inching up at big banks, but small businesses are also realizing they can secure funding from other sources: non-bank lenders such as credit unions, institutional lenders, and alternative lenders have also seen a steady increase. In our survey, when asked where they would turn for alternative capital if their bank was unable to help, 87% said another bank or credit union, 34% said family and friends, 29% said non-bank lenders, and 22% said other investors. 

Small businesses cite unresponsiveness, pricing, and a feeling that they’re too small to warrant more attention as reasons they are dissatisfied with their current bank 

Banks have long struggled to effectively and profitably meet the demands of small businesses. In many cases, poorly conceived product offerings, mismatched operating models, and disconnected legacy technologies have made small business delivery inefficient—not to mention credit policy, procedures, and pricing strategies designed for large commercial customers. At the same time, delivering products meant for commercial customers at a scale more similar to retail banking is a real challenge—and it makes a tangible difference.

What’s next for banks 

Supporting small business growth as the economy comes back to life will be a key opportunity for banks to demonstrate their responsiveness and make all customers feel valued.  

To do so, business leaders at financial institutions might ask themselves the following questions:  

  • Am I supporting small businesses beyond deposits and loans? For instance, respondents say their current banks support them with investment management (58%), cash management (55%), financial planning/advice (55%), safe deposit box (49%) and estate planning (6%). If your institution doesn’t currently offer these services, it might be time to explore options to broaden and strengthen your relationships.  
  • Am I optimizing processes and leveraging automation to provide streamlined service offerings? Improving integration of technology systems and automating low-value activities can help drive better customer service for small business owners with limited time to dedicate to banking.  
  • Do I have pricing strategies, product offerings, and credit policies that can meet the needs of small business customers? In other words, are you making small business owners feel valued, and are your offerings to small business clients fit for purpose? 
  • Am I responsive to small business owners’ needs? Am I communicating as effectively as I can to demonstrate attentiveness? These communications will increasingly take place in a digital environment, as we’ll discuss below. That means banks will have to focus on these touchpoints more than ever moving forward. 

While small businesses are generally satisfied with their online banking experiences, their overwhelming preferences for digital suggest the need for improvement and growth.  

The good news? Small businesses are broadly content with their financial institutions’ mobile apps and online banking systems. But banks can’t rest on their laurels. Expectations are rising and small businesses moving forward will seek even better digital experiences while seeking out less in-person banking.

What’s next for banks 

Expectations for digital experiences will continue to grow. Not only did the pandemic accelerate the shift to an all-digital environment—e.g., via large sums of digitally-delivered PPP loans—but the small business segment itself is undergoing rapid generational turnover as waves of older owners retire and hand the reins to digitally-native Millennials and Gen Z leaders. Meanwhile, digital competitors—be they large financial institutions who have invested heavily in digital or FinTechs such as FundBox or Bluevine—will continue to pose threats to banks that don’t make this shift.

Fortunately, many processes that historically made serving small businesses cumbersome and costly can now be fully automated, including application processing, CIP/KYC, approvals, loan and credit card fulfillment, streamlined monitoring, and renewals. And best-in-class small business customer-engagement applications can now be seamlessly combined with shared technologies, data and analytics tools, and legacy Core Accounting Systems to create an off-the-shelf, "Bank-in-a-Box" solution for small business customers. 


Banks and many of the small businesses that use them have made it through the worst of COVID-19. They’ve even come out on top, creating greater trust with small business owners who saw their offerings as a lifeline. 

But COVID-19 was an anomaly. While it nurtured these relationships, it likely didn’t change many of the fundamental issues that banks had servicing small businesses in the past. Unintegrated legacy technologies, a lack of appropriate product offerings, strategies, and credit policies, and operating models designed for larger customers still present real obstacles. This is especially true in an era of rapidly increasing expectations around digital banking, where small businesses are looking to grow in a newly livened economy. 

The upshot is that the technologies, processes, and operational models exist for banks to make their success with small businesses during COVID-19 a long-term reality. Now is the time to double down and win over these customers for good.  

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