How to Apply for a Small Business Loan in Hawaii

The COVID-19 pandemic has had a devastating effect on Hawaii’s economy. According to the latest reports, over 1 in 3 of the island’s residents are now registered as unemployed. The impact on small businesses has been equally severe. If you’re a small business owner in Hawaii who’s struggling to cover payroll or operating costs, help may be available. With the introduction of the CARES Act at the end of March, two new small business loans have become available to assist businesses suffering a temporary loss of revenue as a result of the crisis. Both administered by the Small Business Administration (SBA), the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) provide a much-needed cash injection without the usual red tape and bureaucracy involved in standard business loans.

The Payment Protection Program (PPP)

With small businesses representing 99.3% of all businesses in Hawaii, and with more than half of the state’s workforce employed in mom-and-pop operations, easing the financial strain on the sector through initiatives like the PPP will be vital in ensuring an eventual economic recovery. As Star Advertiser reports, the uptake in PPP has already been huge, with over $2 billion in loans for around 11,500 Hawaii businesses already provided. The funds from the first wave may have now dried up, but with a fresh wave of funding on the way, it could still prove a lifeline to small businesses struggling to meet costs.

Primarily designed to cover payroll expenses, the loans may also be used against any costs relating to rent or mortgages, utilities, payroll, healthcare, and severance pay. Loans are available up to a maximum of $10 million per business. Businesses that have been in operation since February 15, 2019, will be able to borrow up to 250 percent of their average monthly payroll costs between February 15, 2019 – June 30, 2019. Businesses founded after June 30, 2019, will be able to borrow up to 250 percent of their average monthly payroll costs between January 1, 2020 and February 29, 2020. If at least 75% of the loan is used to cover payroll costs, loan forgiveness can be requested. The loan will be charged at a fixed interest rate of 1%, and is due within 2 years, with no penalties or fees for early repayment. Payments are automatically deferred for 6 months from the loan origination date, with further deferral possible.

How to Apply For PPP in Hawaii

The Payment Protection Program is administered by the SBA, but applications should be made through approved, participating lenders. This includes:

• Existing SBA 7 lenders
• Federally insured depository institutions
• Federally insured credit unions
• Farm Credit System institutions
• A full list of approved lenders can be found at sba.gov.

To apply, download a copy of the SBA Paycheck Protection Program loan application form and submit, together with the requested documentation (this includes confirmation of expenses relating to payroll, rent, utilities, and healthcare along with your tax records) to your preferred lender. Loans are only available to entities classed as a small business under the SBA definition. This includes businesses that employ 500 workers or less OR businesses that employ more than 500 workers but who fall within the description of small business under the SBA Size Standards. Sole proprietors (either with or without employees), independent contractors or self-employed persons, private non-profit organizations, tribal businesses, and 501 veterans organizations are also eligible. All businesses must be able to demonstrate revenue loss as result of COVID-19.

Economic Injury Disaster Loan (EIDL) Program

The Economic Injury Disaster Loan (EIDL) Program is available to small businesses that have suffered a temporary loss of revenue as a result of COVID-19. The EIDL may be used to support payroll and other operating costs. Loans may be requested up to a maximum of $2 million, depending on the extent of economic injury suffered. Borrowers may request a forgivable advance on the loan at $1000 per covered employee, up to a maximum of $10,000. The remainder of the loan will be charged at a fixed interest rate of 3.75% and is based on a maximum term of 30 years. Interest will begin accruing from the loan origination date, but payments may be deferred by up to one year.

To qualify for a loan, you must demonstrate your business falls within the definition of small business according to SBA guidelines. As per Investopedia, this includes businesses that have a place of business in the USA, that operate primarily out of the US, are independently owned, are not dominant in their field on a national basis, and that employ less than 500 employees. Businesses that employ more than 500 employees may still qualify providing they meet SBA Size Standards for small businesses.

How To Apply for the EIDL in Hawaii

As Investopedia notes, loan applications are currently on hold pending further funding. The program is expected to reopen to applicants on April 27, 2020, following refunding by Congress. Applicants are treated on a first-come, first-served basis, so it’s recommended to apply as soon as possible once the new wave of funding is released. Applications are made directly through the SBA portal. After self-verifying your eligibility, you’ll be asked to provide information relating to business activities, income, and business owners. You’ll also be asked to confirm any criminal history that may have relevance to your application. Once your application has been submitted, you’ll be informed of who your loan officer will be. in order to prevent any delays in payment, it’s vital to provide any additional information they request as soon as possible. If you have requested a loan advance, you should receive payment within 3 days of the application being approved. The remainder of the loan may take longer, depending on the volume and backlog of applications at the time.

Applying For A Joint PPP And EIDL

The SBA guidance allows small businesses to apply for both a PPP and EIDL on the provision funds from each loan are used for different purposes. For example, if you use a PPP to cover payroll expenses, you would only be eligible for an EIDL if you intend to use it for operating costs (rent, mortgage interest payments, etc.)