Updated: 4/24/2020, 8:18 a.m.
President Trump today signed off on another $320 billion in loans approved by lawmakers to help businesses cover payroll and other expenses. Hawaii firms secured $2.46 billion from the first round of funding, but not without difficulty.
Many storefronts are now dark in the normally-bustling Kaimuki Business District along Waialae Avenue. One of them is Via Gelato, an ice cream shop owned by Melissa Bow.
Bow made the decision to close her store after business dropped 80% to 90% following Gov. David Ige’s stay at home order. She says the store was still doing a decent business under the initial city order in March mandating that restaurants transition to a takeout-only model.
But when the governor directed Hawaii residents to shelter at home and avoid all unnecessary trips out, staying open no longer became viable. Bow says many of her employees were also nervous about the possibility of contracting the virus at work.
Closing allows her to save on some expenses, although she is still incurring large costs like rent. She’s also continuing to pay the wages of employees staying home.
Because Bow is keeping her staff on the payroll, she turned to the federal government’s Payroll Protection Program for help. PPP, as it is known, offers potentially-forgivable loans, if employers maintain their workforce. Of those funds, 75% has to go toward paying wages, but the remainder can be used for other expenses.
Since Via Gelato is closed, Bow has no revenue coming in to cover expenses. She has been covering the cost of employee compensation out of her savings, which was rapidly nearing depletion before any federal money had reached her. When we spoke, she was preparing to withdraw funds to cover the upcoming payroll.
“At that point, we’ll be pretty close to zero,” Bow said. “We’ll cross that bridge when we get to it.”
Bow applied and was approved for a PPP loan, but she had no idea for how much it would be for or even when the money would be available.
“There’s just nobody you can call to ask about the status or how much is it. They’re just so overwhelmed right now. There’s just no support, for them or for us,” she said, describing the uncertainty as par for the course.
The "them" Bow refers to is the U.S. Small Business Administration, the federal agency overseeing the Payroll Protection Program. Jane Sawyer, who oversees SBA’s Hawaii district, said the goal was to get money out to loan applicants within 10 days of approval.
But that has proven to be a challenge. The SBA is responsible for distributing funds, but relied on a network of nearly 5,000 lending institutions to accept and process applications. Ultimately, 1.6 million loans nationwide were granted, valued at more than $342 billion.
Locally, Hawaii firms were successful in securing funds. A total of 11,533 local companies were approved for PPP loans valued at $2.46 billion. Sawyer says this is by far the fastest any small business loan program has been rolled out, from creation to distribution of funds, but demand simply overwhelmed processing capacity.
“Just by the sheer numbers that we have been doing, it has been very difficult to do because there are security issues and there are banking issues.”
She emphasizes that money is on the way to business owners who were given an official SBA loan ID number by their bank. All applicants who were issued an SBA number had their request approved before the initial round of funding was exhausted and should be receiving loans.
Banks have been queuing up applications that were not processed in time, but Sawyer recommends that business owners check with their lender to make sure their application is ready when the second round of funds become available.
However, there are deeper, structural issues besides delays in distributing loan funds. As its name implies, the Payroll Protection Program is primarily meant to fund payroll. Businesses can only get the loan forgiven if they use the money to pay employee wages.
For some operations that doesn’t necessarily make financial sense. Garrett Morrero, founder of Valley Isle-based Maui Brewing Company, told HPR that the vast majority of the company’s approximately 700 employees have been laid off.
Maui Brewing is still producing beer at its main brewery in Kihei. Morrero says sales of canned beer remain strong, which has allowed him to keep 45 workers fully employed. But the company also generates a substantial portion of revenue from its four dine-in restaurants.
Morrero says the restaurants, two each on Maui and Oahu, represent roughly 50% of total revenue for Maui Brewing and most of the company’s employees. Three of the locations have been closed completely, with the Kihei location open only for take-away beer sales.
“The amount of food and beverage we would have to sell in order to offset even the minimum expenses just didn’t make sense,” Morrero said of the two Oahu locations. He added that once tourists largely disappeared from Hawaii, the math ceased to pencil out at the Maui locations as well.
Morrero applied and was approved for PPP but says even with funds to cover payroll, it’s unlikely there will be enough revenue coming to justify re-opening the restaurants.
“We’re still trying to figure out the best way to deploy those fund,” he said.
There is no rule that says employees have to be do their original job. Stan Glander, owner of the popular Oahu breakfast burrito purveyor Kono’s, has been paying some food service staff to paint or make other improvements in some locations.
Melissa Bow from Via Gelato was paying her employees to stay home. She did eventually get her PPP loan, which will cover two months of payroll, and now plans to reopen with limited hours, four days a week.