If there is one thing the successful execution of the Paycheck Protection Program in Iowa taught us, it’s that relationships matter. Thanks to the century-old bond between Iowa Main Streets and their local banks, Iowa lenders were able to deliver more than $8 billion in PPP relief to nearly 169,000 Iowa small businesses, hospitals, nonprofits and farms. Iowa banks truly acted as economic first responders for our communities.
As our small businesses absorbed the shock of the pandemic-induced recession, our public leaders immediately considered ways they could help keep doors open and Iowans employed. The PPP was devised as a public-private partnership with the banking industry. As a member of the U.S. Small Business Committee, Iowa Sen. Joni Ernst played an integral role in the PPP’s development and execution. Her office served as a key liaison between lenders, the Treasury Department and the Small Business Administration.
The magnitude of what was accomplished through PPP cannot be overstated. In its early days, lenders were flying the PPP airplane while it was being built. The SBA and Treasury were tasked with developing a new $780 billion lending program utilizing an existing SBA pipeline built for processing $30 billion in loans annually. It’s no wonder there were hiccups at the start.
The genius of the program was tapping into the branch and digital network of the banking industry to deliver sorely needed forgivable loans to eligible recipients. In Iowa alone, nearly one million jobs were secured by incenting small employers to maintain pre-pandemic staffing levels during trying times.
In using nearly any PPP metric comparing states, Iowa stands out. After just the first 10 days of the program, an Evercore ISI study suggested Iowa lenders made enough loans to cover 65% of eligible small business payrolls — one of the highest rates in the country. At the time, lenders weren’t sure how long the program dollars would last, so they worked nights and weekends, often from home, to deliver for their customers.
Part of Iowa’s success can be traced to our diverse banking system. Iowa has more bank charters per capita than any other state in the nation. Iowa bankers live where they work. They serve on city councils, volunteer for local charities, sponsor local little leagues, lead community economic development initiatives, teach financial literacy concepts and attend church with their customers. They are vested in their communities and have an added incentive to see them succeed.
This community connection is also why just 2.6% of Iowans are unbanked. Studies have shown a banking relationship is paramount to upward mobility and wealth creation. Iowa’s rate of unbanked residents is half the national average and the third-lowest in the country.
So, relationships matter. Being present in a community matters. And, despite the trend toward all things digital, the public-private partnership known as PPP showed us again that, in Iowa, it’s all about neighbors helping neighbors.
John Sorensen is president and CEO of the Iowa Bankers Association