An estimated 11,000 Hawaii small businesses tried but failed to snag forgivable federal loans for paying workers and certain bills amid the COVID-19 pandemic ravaging the economy.
But expectations are high that adding $310 billion to the Payroll Protection Program will be approved today in the U.S. House after the Senate did so Tuesday in response to an initial $349 billion running out in 13 days.
Hawaii U.S. Rep. Ed Case said Wednesday that he expects a bill with the extra PPP small-business aid will be passed by the House and signed by President Donald Trump today.
“It’s just critical assistance on many fronts for small businesses, and in Hawaii small business is king,” Case said, noting that such businesses with fewer than 500 employees represent 96% of employers in the state.
For Emily Steele, owner of Hawaii Flower Lei Corp., a second chance to obtain PPP funding could determine whether her nearly 20-year-old Honolulu company survives.
“I’m just desperate for it,” she said Wednesday while working to preserve her operation after furloughing all 15 of her employees in response to the loss of mostly tourism-related business that left Hawaii Flower Lei unable to pay all continuing expenses.
Steele said she applied in early April for a PPP loan through First Hawaiian Bank but encountered a processing hitch that she believes caused her to lose out on what was a mad rush from businesses across the nation to obtain loan proceeds from the program run by the U.S. Small Business Administration.
If Steele can obtain a PPP loan, she said she would pay all her employees and obtain help with marketing, preparation work and administrative tasks that would increase revenue perhaps enough to cover unpaid bills and help ensure long-term survival.
“I really hope for this to come through,” she said. “It’ll be tough still, but I hope it’ll be just enough — just a little breathing room, a little ease — to get us through this.”
The loans, up to $10 million and guaranteed by the federal government, can be fully forgiven if primarily used to pay up to 8 weeks of payroll costs including benefits. Up to 25% of proceeds can be used to pay rent, mortgage interest and utility bills.
Unforgiven proceeds are treated as a 2-year loan with a 1% interest rate.
Hawaii businesses as a group did relatively well in obtaining PPP loans initially between April 3 when application submissions began and April 16 when funding was exhausted.
SBA reported approving 11,553 Hawaii loans worth nearly $2.1 billion. That’s just 0.6% of the national total but was more than 20 other states and territories.
Hawaii’s $2.05 billion total was right ahead of Nevada at $2.01 billion and New Hampshire at $2 billion.
“For a small state, Hawaii did very well in bringing dollars in to support our small businesses,” said Jane Sawyer, SBA Hawaii district office director.
The Hawaii Bankers Association estimated that loans were approved for about one-third of Hawaii’s small businesses, and that another third representing roughly 11,000 businesses had applications pending when funding ran out.
Some local bank representatives and the association said they will be ready for quick submittal of the pending applications to the SBA if the PPP extension happens.
For small businesses that didn’t previously apply but want to now, lenders advise them to gather required documents listed with application instructions so they can apply quickly.
Neal Okabayashi, executive director of the Hawaii Bankers Association, said local lenders had a disadvantage with PPP’s initial launch because of short notice for when applications would be accepted, which gave many mainland lenders a head start because of time-zone differences.
Okabayashi also said local lenders had to obtain approval to add authorized staff for submitting loans to SBA during the first round.
“Hawaii banks did finally receive more authorized users, so we hope that submittal of the approximately 11,000 loan applications still pending will be smoother,” he said.
There has been some criticism of initial PPP guidelines that allowed loans to go to big businesses that included well-capitalized public companies.
Shake Shack, which furloughed 1,100 of its roughly 8,000 employees, vowed to return its $10 million loan, and Trump administration officials vowed to stop other big companies from using PPP.
SBA said the average PPP loan was $206,000. It also reported that 4,412 of the nearly 1.7 million loans were over $5 million and equated to about 9% of the $359 billion program total.
A provision in the bill to authorize a second PPP funding round would channel $60 billion exclusively through smaller lenders to help ensure that smaller businesses are better served.
Case predicts that an extra $310 billion would be completely consumed relatively quickly if approved.
“There’s a tremendous need out there across the country,” he said.