September 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. 

Amid challenges presented by the pandemic, 82% of respondents either maintained (51%) or gained (31%) trust in their banks over the past year. Only 18% lost trust. 

Why? In short, small businesses were in need and their banks came through. PPP loans, which were received by approximately 70% of small businesses in most industry sectors, played an especially significant role. When asked how their PPP experience changed how they perceived their financial institution, 52% of respondents who applied said mostly positive, while 16% said very positive; only 22% had their perceptions change for the worse. Those who had a positive experience overwhelmingly (89%) attributed it to their bank’s ability to deliver and their responsiveness (74%).  

Positive experiences likely also stemmed from approvals of lines of credit (applied for by 52% of respondents), SBA loans (applied for by 40% of respondents), and equipment/term loans (applied for by 17%). Only 22% of respondents’ loans were declined.  

These findings track with others suggesting that banks performed well for small businesses in the past year: 85% believe their needs are being met by their current bank, and on a scale of 1 to 10 (where 0 means “not at all likely” and 10 means “extremely likely”), when asked whether they would recommend their primary financial institution, averaged 7.06. 

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. 

It’s no surprise, then, that 32 of our respondents said they may not always feel valued by their financial institution. When asked why—especially at a critical juncture for so many—69% of those respondents said their business was too small to warrant more attention from their banker. Sixty-six percent said their financial institution is unresponsive to their needs, while 56% percent said they don’t receive any special treatment (offers, fees, pricing). 

These issues can make a tangible difference: Bank fees (53%) and responsiveness (48%) were the top reasons why small businesses considered switching financial institutions in the last year. For those who had a negative experience with PPP loans, lack of responsiveness (58%) and not feeling valued (40%) were the top two reasons as well. 

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: On a scale of 1 to 10, the average satisfaction across respondents was 7.76 for their bank’s online banking system and 7.41 for its mobile app. 

But banks shouldn’t rest on their laurels. Expectations for digital are constantly rising, and a significant percentage of respondents cited the functionality/quality of online banking (28%) and functionality/quality of mobile app (23%) as reasons why they considered switching financial institutions in the last year. 

Moving forward, small businesses will seek more and better digital experiences. Seventy-eight percent said they think a completely digital banking service would improve their experience. Half said they would like to apply for their next loan or account via mobile app, and online (34%) was the second most common, while only 13% said they’d like to apply in branch/in person—3% said they’d like to over the phone. 

It follows that respondents also indicated less of a preference for in-person banking. When asked if they’d rather have a more accessible local banker or a remote banker who’s more knowledgeable about their business/industry, 77% chose the latter. This makes sense as 63% of respondents visit their bank’s physical branch a few times a year or less.  

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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