- Banks have lent more than $700 billion as part of the Paycheck Protection Program.
- At Wells Fargo, small business head Steve Troutner took the role just one day after PPP became law.
- Insider spoke with Troutner and David Miree, Wells’ head of consumer and small-business diverse customer segments, about the bank’s rollout of PPP.
- See more stories on Insider’s business page.
There was no denying what Steve Troutner’s top priority would be before he started his new role at Wells Fargo in the spring of 2020.
The CARES Act, the federal government’s first major economic response to the COVID-19 pandemic that came in March 2020, was signed the day before Troutner began as the bank’s head of small-business banking. Included in the aid package was the Paycheck Protection Program (PPP), a small-business lending initiative that would be a key focus of Troutner in the months to come.
“It sure felt like 30 seconds after I took the role, the Paycheck Protection Program legislation was passed and we were off and running, trying to get that stood up and implemented to help customers as quickly as we could,” Troutner told Insider.
Since the advent of PPP, federal legislation has authorized nearly $1 trillion in lending to small businesses, about $718 billion of which has been used to date through multiple rounds and extensions, according to the latest data through March 21 from the Small Business Administration.
Most of such lending has passed through America’s biggest banks, Wells Fargo included. In 2021, for example, about 2% of all PPP lenders have handled 47% of all PPP loan volume.
Troutner and David Miree, Wells’ head of consumer and small-business diverse customer segments, spoke to Insider about lessons learned from last spring’s rollout, and the future of SMB lending.
The pandemic coincided with leadership change at Wells
The rollout of PPP came during a unique time at Wells Fargo. The bank was in the midst of a top-to-bottom reorganization of its consumer and small-business division that was laid low by a series of fake account scandals first widely revealed in 2016. The incident, which involved opening up bank accounts for customers without their permission or knowledge in order to meet sales targets, led to the departure of several of the bank’s top executives. In 2020, Wells Fargo also paid $3 billion to settle criminal and civil investigations surrounding the scandal.
Since taking the helm of consumer and small-business banking at Wells in 2016, Mary Mack, a 32-year veteran of the bank, has hired a host of new executives like Troutner, who joined Wells Fargo in 2019, to lead the reorganized small-business division.
That talent also includes Miree, who rejoined the bank in 2017 after stints leading Santander Bank’s US retail branches and small-business network and Webster Bank’s consumer deposits and branches.
Both Troutner and Miree said their experience working in retail branch banking prior to their current leadership positions was instrumental in getting PPP off the ground at Wells Fargo.
“Seeing that up close and personal along the way for years really helped to inform a lot of initial opinions and perspectives as to how to proceed,” Miree said. “Realizing there’s nothing better than having that first-hand perspective from those small-business owners as to what their true needs are, and then helping to close those gaps for them.”
Wells Fargo’s PPP, by the numbers
The initial rollout of PPP loans at Wells Fargo and other banks presented challenges. Chief among them was the criticism that many lenders didn’t do enough to prioritize lending to some of America’s hardest-hit small businesses, particularly those owned by people of color and in traditionally underbanked communities.
A May 2020 blog published by the New York Fed, for example, showed that prior banking relationships, not need, were one of the key determinants in successfully receiving a PPP loan.
At Wells, an asset cap imposed by the Federal Reserve in the wake of the fake account scandal also limited the extent to which the bank could participate in the lending program.
The restriction was subsequently lifted in April 2020 for PPP lending — with a caveat that the bank return all proceeds from PPP and other federal loan programs either to the US Treasury or to nonprofits.
As a result, Wells Fargo created the Open for Business Fund last July, comprised of about $400 million of processing fees the bank has received from its PPP lending. Roughly $250 million of that pool of funds, the bank said, has been allocated for Community Development Financial Institutions, or CDFIs, which are designed to help small businesses in traditionally underserved communities.
Troutner said limitations around the bank’s lending wasn’t a huge focus of the small-business team during PPP’s early days.
“I wasn’t sitting there thinking about the asset cap on a daily basis,” Troutner said. “I was thinking about, ‘I have a base of over 3 million customers who potentially need help with this program. How do we get a program designed at big enough scale?'” he added.
At Wells, 96% of its successful PPP applications so far in 2021 have been for businesses with fewer than 20 employees — above the latest industry average of 93% — and 24% have been for businesses in lower-to-moderate income areas — about on par with similarly sized banks.
And while Wells ranks seventh in overall PPP lending in 2021, according to SBA data through March 21, it ranks fifth-lowest among the nation’s largest 15 lenders in terms of average loan amount — a statistic the bank said reflects Wells’ emphasis on prioritizing smaller businesses.
While the percentage of Well’s lending in lower-to-moderate income and majority-minority areas has remained relatively consistent over time, the bank has seen its average loan size decrease from $54,000 last year to $42,000 this year.
“We really see more of that difference has been made to the smaller businesses that need access to capital the most. That’s a real pride point for us, seeing how we’ve managed to really serve the smallest of the small businesses that have the highest needs for capital,” Miree said.
Wells also announced on February 18 that it would open its latest round of PPP lending to small businesses who weren’t yet already customers of the bank — a change from a prior requirement that the loans go to applicants that already had a business checking account at Wells before December 1, 2020.
“The awareness of the program is not as universal as we would like it to be. And even for folks who might be aware of it, the complexity of that program, it can feel overwhelming. That was something that we definitely saw and learned about in the first round,” Troutner said.
To that end, Wells Fargo launched a marketing campaign aimed at businesses in low-to-moderate income and majority-minority census tracts with 10 or fewer employees, a tactic that Troutner said reached nearly a million people over the course of 45 days.
“We want to make sure that we were able to do a more deliberate outreach to those populations in the second round,” he said.
The future of small business lending is digital
Both Troutner and Miree emphasized the importance of a digital-only strategy in rolling out Wells’ PPP tools, a necessity because of the scale of the program — “We did the equivalent of about three-and-a-half to four years of lending volume in the space of a handful of months,” according to Troutner — and because of the desire to limit in-person interactions in the middle of the pandemic.
These digitally-focused lending tools will be ultimately be a roadmap for future product development at Wells, Miree and Troutner said.
“There’s a whole series of lessons that we’ve learned from PPP itself,” Troutner said. “Number one for me is that we have to make a digital-first a core guiding principle for how we want to serve small-business customers going forward,” he added.
A key focus of the digitally-focused effort, Troutner and Miree also said, will be to provide more than just cash to Wells Fargo’s Open for Business Fund partners. Many of these partnerships will revolve around upgrading tech and digital capabilities at small businesses.
“You have to get them through the short term, but then what’s really important is also setting them up for the longterm,” Miree said.
It was sentiment echoed by Troutner.
“The pandemic has forced small businesses to have to dramatically evolve their business models. And almost every one of them now has had to have come up with some form of a digital strategy,” he added.
Leave a Reply
Leave a Reply
This site uses Akismet to reduce spam. Learn how your comment data is processed.
