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Small banks help small agencies get payroll loans

Ad Age 04 May 2020 09:00

When Glue-IQ, a 30-person Miami agency, sought to apply for the Paycheck Protection Program (PPP) loan when it was available April 3, CEO-Founder Gaston Legorburu initially went to a major bank that is also a client. Legorburu declines to name the institution, but says he was advised by one of its bankers that it would be better for him to go through a smaller, regional bank.

Legorburu had just started the application process with his local bank when the client called with the news that he had been approved for the loan.

“I called my local bank, said ‘Thank you guys for doing it, but I’m not going to move forward,’” he recalls.

Three days later, Legorburu received “a very impersonal email” from the big banker telling him the application had been denied.

“The email said they would be sending me a letter in the next three weeks to tell me why,” Legorburu says. “It said there was no person you could talk to as they’re all overwhelmed.”

Luckily for Legorburu, the local bank was still able to put his application through and secure the loan.

PPP problems

Luck was on Legorburu’s side, but it hasn’t been for many small businesses that have not been able to receive the PPP loan. Since the initial funds ran out not long after applications opened, Congress approved an additional $310 billion in relief for that companies can apply for beginning today.

The process has had a well-documented share of problems. The New York Times reported that dozens of large companies have received payouts under the program, which was intended to help small companies pay necessities like employee payroll and rent.

For a lot of small agencies like Glue-IQ, securing the PPP loan is critical. “We’re a two-year-old independent,” Legorburu says. “We’re completely self-funded. The money that’s in this is all my money. The PPP loan is amazing and I’m incredibly grateful. It’s allowed me to pay my people, and I’m doing everything in my power to not lay off.”

What several small agency executives are finding—including the five execs interviewed for this story—is that regional banks might be their best option for securing a PPP loan.

Regional banks to the rescue

Frances Webster, co-founder and chief executive officer of 25-person agency Walrus, says she had to move the agency’s entire business from a major bank to a smaller one to get PPP funds. She declined to name the banks involved.

“There was a ton of confusion,” Webster says. “We were with a large bank but had no luck with them.”

But then Walrus’ personal banker left the large institution where he was employed for a regional bank, which was able to secure the loan for Walrus. The agency is now moving its entire business there.

“It’s all about relationships,” Webster says. “It’s really important to have a good banker, someone who has your back.”

Alan Brown, CEO of 50-person Seattle-based agency DNA, worked with his regional lender, Heritage Bank, to prepare for the PPP loan application process before it opened. Brown says Heritage Bank went through training ahead of the start date to know how to use the site to submit the applications to the Small Business Administration. “We pretty much were ready to go when it opened,” Brown says.

The process wasn’t without hiccups. Brown says the site through which the PPP loan application had to be submitted was experiencing delays and his request almost missed the window. It did not.

Nick Paul, president and founder of 80-person Chicago agency O’Keefe Reinhard & Paul, was also able to secure the loan through his regional bank, Wintrust.

“They were all over it,” Paul says. “I don’t want to say the process was easy. The uncertainty and timing [caused] heightened anxiety. But if you remove that piece of it, the process was great for us.”

Paul says Wintrust sent all the application materials to OKRP ahead of April 3. “When the document was released, we pretty much cut and pasted all of our information and submitted that weekend,” he says. “Two days later the money was in our bank account.”

Jeff Sweat, founder of 10-person ad industry PR firm Sweat + Co., says he wished he knew the benefits of working with a smaller bank “a week or two earlier; that’s something we would have attempted.” Sweat, like countless other small business owners, went through his primary bank, Bank of America, and did not receive the PPP loan.

According to CNN, Bank of America sent 184,000 PPP applications to the Small Business Administration and only 1,000 had been approved as of last Wednesday, when Ad Age spoke with Sweat.

Sweat says he hasn’t heard anything on the status of his first application but will be attempting the process again today for the second funding round.

“It’s been the most frustrating thing,” he says. “No idea if we were approved,” Sweat adds. “There has been zero communication.”

Declarations of independence

While the loans are a lifeline to small agencies whose revenue is dependent on fewer clients than the giants, these shops have more leeway than publicly held agencies that operate in a quarterly pressure cooker controlled by stockholders.

DNA’s Brown says he and Founder-Chairman Dan Gross made the decision to “basically not make a profit this year,” something that would not be possible if the shop was owned by a publicly traded holding company.

“As an independent, you can do that,” Brown says. “We decided we’re going to forgo any profit to keep our people employed. Our business is all about our people.”

Melissa Lentz, CEO of Magnet Global, a global network with around 25 indie agencies in the U.S., says all the shops in her network were able to secure the small business loan.

“The industry is all about our talent,” Lentz says, noting the importance of the loan. Still, Lentz says shops left out of the Paycheck Protection Program will come out of this OK.

“These guys have grit,” she says. “They don’t have the backing of a holding company,” but “they know how to navigate [a challenged environment].”

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