The U.S. Small Business Administration announced Friday it is offering low-interest federal disaster loans for working capital to Hawaii small businesses and nonprofit organizations starting to feel a substantial economic pinch from the coronavirus outbreak.
That’s good news for the many mom-and-pop businesses locally who have been forced to lay off employees, reduce hours, go to an alternative business model, or shutter indefinitely.
“SBA is strongly committed to providing the most effective and customer-focused response possible to assist Hawaii small businesses with federal disaster loans. We will be swift in our efforts to help these small businesses recover from the financial impacts of the coronavirus COVID-19,” said SBA Administrator Jovita Carranza. “Small businesses, private non-profit organizations of any size, small agricultural cooperatives and small aquaculture enterprises that have been financially impacted as a direct result of … COVID-19 since Jan. 31 … may qualify for economic injury disaster loans of up to $2 million to help meet financial obligations and operating expenses which could have been met had the disaster not occurred.
The loans became available after federal approval of a certification request submitted Tuesday by Gov. David Ige.
“Small businesses are a vital economic driver in our community, and we must do everything we can to support them as they struggle through this crisis,” said Ige. “We appreciate the SBA’s quick action to approve this loan program for small businesses that have been hit so hard by COVID-19 outbreak.”
According to an analysis by the Department of Business, Economic Development and Tourism, there are 8,302 businesses in Hawaii with 99 or fewer employees. Those businesses account for 96,189 jobs with a combined annual payroll of $3.16 billion.
Applicants are required to file the following documents:
• Loan application (SBA Form 5), completed and signed.
• Tax Information Authorization (IRS Form 4506-T), completed and signed by each applicant, each principal owning 20 percent or more of the applicant business, each general partner or managing member; and, for any owner who has more than 50 percent ownership in an affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management;
• Complete copies, including all schedules, of the most recently filed federal income tax returns for the applicant business; an explanation if not available.
• Personal Financial Statement (SBA Form 413) completed, signed, and dated by the applicant, each principal owning 20 percent or more of the applicant business, and each general partner or managing member.
• Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used) are required to file three SBA forms and one IRS form.
Judi Mellon, director of the Small Business Development Center in Hilo, said businesses that apply should receive an answer from SBA in “about three weeks.”
“The key is, it’s so important to submit a complete application,” Mellon said. “Otherwise, they’re going to delay it (or) they’re going to decline it. And then, it will have to be resubmitted with all the missing pieces. So an incomplete application means slowing down the process.”
Loan eligibility is based on the financial impact of COVID-19. The interest rate is 3.75% for small businesses. The interest rate for private non-profit organizations is 2.75%. SBA offers loans with long-term repayments in order to keep payments affordable — up to 30 years — and are available to entities without the financial ability to offset the adverse impact without economic hardship.
“These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. Disaster loans can provide vital economic assistance to small businesses to help overcome the temporary loss of revenue they are experiencing,” Carranza said.
Mellon said it is imperative for businesses to submit their economic data for the past several years, and not just for the past year or two.
“Many of our local businesses were already down since May of 2018 because of the Kilauea disaster,” she explained. “So if they submit only the last year or two years worth of data, that might not look like their business is down much at all. So, if they’ve been in business for three years or five years, it is really worth it to submit a bigger picture, because we’ve been hit already on the Big Island by the Kilauea disaster, and some by Hurricane Lane — and now this. So if they only present 12 months, it may not look as though (business is) down that much.
“Plus, this emergency is new to us in the last one to two weeks, so it may not look as though it’s all that much different. But it is different.”
Mellon said businesses with up-to-date data, such as point-of-sales reports for restaurants, bars and retail outlets, should include those in their application packages.
“If the businesses have really good accounting data, they should be able to tell, even in the past week,” if they’ve seen a decline and how much, Mellon said.
She added businesses should reapply if their first application is rejected.
“If business owners get a declination from the SBA, they can call us. We’re the people on the ground here to help them work through that,” Mellon said.
Applicants may apply online, receive additional disaster assistance information and download applications at https://disasterloan.sba.gov/ela.
Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email disaster-customerservice@sba.gov for more information on SBA disaster assistance. Individuals who are deaf or hard‑of‑hearing may call (800) 877-8339.
Completed applications should be mailed to U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Rd., Fort Worth, TX 76155.
The deadline to apply for an economic injury disaster loan is Dec. 21.
For more information about available SBA resources and services, visit SBA.gov/coronavirus.
Those needing further assistance or who were declined the first time can call the Small Business Development Center at 933-0776.
Email John Burnett at jburnett@hawaiitribune-herald.com.