Published in Finance

Reporter's Notebook: Banker beware

BY Sunday, May 24, 2020 06:50pm

Banking executive Craig Dahl said it perfectly.

In a recent conference call, the president and CEO of Detroit-based TCF Financial Corp. — the parent company of what remains known in Michigan as Chemical Bank — voiced a simple ethic that all businesses, no matter their industry or their size, must keep in mind in the COVID-19 pandemic.

“Times like these are when the greatest companies show their colors,” Dahl said during the conference call in which TCF Financial executives discussed their quarterly financial results.

His sentiment is particularly true in banking these days, when companies large and small have any number of options as both banks and credit unions eagerly compete for their business.

In fact, many small business owners recently expressed unhappiness with their bank’s handling of the U.S. Small Business Administration’s Paycheck Protection Program. Some are not the least bit shy in voicing their anger and frustration on social media.

One recent example is Rudy Malmquist, the owner of Mindutopia Inc., a Grand Rapids-based web development company. He recently posted on Twitter that he was “ignored for three weeks” by his large bank, where he had been a client for many years.

“I switched to a local bank & had approval for my PPP loan in hours,” Malmquist tweeted. “I’ll be moving all my business & personal accounts very soon!”

In a recent conversation, Malmquist told me that one of his biggest frustrations with his now-former bank was a lack of information or response, and not knowing the status of his PPP loan application. In three weeks of waiting, he heard nothing other than receiving automated emails when the SBA ran out of funding for the first round of the PPP on April 16. He also was able to go online to check the status of his application.

When he checked one last time after the PPP resumed for the second round and found he was still awaiting a decision, Malmquist decided to go elsewhere. After he went to ChoiceOne Bank and quickly had his PPP application submitted and approved, he moved his business and personal accounts. Malmquist believes larger customers at his former bank “got moved to the front of the line” ahead of him.

“I felt I had a banker. I was wrong,” Malmquist said. “I’m a small business and I think in the grand scheme of things I don’t matter. I’m done with them. This is a pivotal time. I needed a bank, and they failed me.”

Malmquist is not alone in his frustration. Our inboxes here at MiBiz contain other tales of small business owners unhappy with or feeling slighted by their bank over the PPP application process.

Their stories show the risks banks face in mishandling relationships with small business owners, whose anxiety remains high over what the future holds because of the battering the pandemic and stay-home orders have wrought on the economy. Customers who feel put off — whether justly or unjustly, whether from perception or reality — may make the quick decision to shop around. In the competitive banking landscape of West Michigan, they will find plenty of willing takers for their business.

That point was driven home in Macatawa Bank Corp.’s annual shareholders meeting a few weeks ago.

Chairman Richard Postma told shareholders that Macatawa Bank has picked up small business owners left frustrated by how their former banks handled their PPP loan applications. Macatawa Bank not only accepted and processed PPP loan applications for those small businesses, but now counts them as clients, Postma said.

“In the PPP program, a number of businesses were having somewhat of a difficult time getting their loans fulfilled at their existing bank. We have taken a number of those businesses on and have also received their business transferred from another institution to us,” he said.

As banks reported first quarter earnings during April, they offered information on the massive volume and value of PPP loan applications they processed and submitted to the SBA on behalf of clients. Surely, there were fumbles along the way, given the enormity of the undertaking and unease from persistent changes in guidance from the federal government.

Banks also reported on the number of payment deferrals and loan modifications they approved for consumer and commercial borrowers, which offers a sign of their willingness to help customers through the present crisis. That willingness to pivot is surely welcome by the businesses that have been getting crushed economically by the pandemic.

Yet even with best intentions, deeds count far more than words; executing and delivering is what matters most to any customer. While most businesses are forgiving of honest errors, right now is an exceedingly bad time to disappoint a customer and have them feeling that you don’t care.

Perhaps the lesson from Dahl, Postma and Malmquist is to consider a new twist on the old phrase, “buyer beware.” These days, it’s “banker beware” if a customer feels let down at a time when they need their banker the most. 

Said another way: Hell hath no fury like a small business owner who feels scorned.

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