 Now welcome back to Think Tech. I'm Jay Fidel. It's a 12 o'clock block here on a given Tuesday, and that means we talk about restaurants, restaurants of Hawaii. And let me tell you, I always have lunch before restaurants in Hawaii, because if I don't do that, I get so hungry on the show, I can hardly host it. Yeah, and it's all your fault, fault Cheryl. Cheryl Matsuoka, she is the executive director of the Hawaii Restaurant Association, a very important person. Welcome to the show, Cheryl and Mark Spain. Mark is the executive of the SBA in Hawaii. That's great. Great to meet you. We're going to find out more about you. Cheryl, why don't you introduce Mark? Thank you, Jay, and thank you again for having us on this show. I had to print it out, Mark, so I get the title correctly. Mark Spain, thank you so much for being with us, is the United States Small Business Administration district director for the state of Hawaii, and the territories of Guam, American Samoa, the Commonwealth of Northern Mariana Islands, the federal states of Micronesian, the Republic of Palau, and the Republic of the Marshall Islands. Did I get it? You got it all, Cheryl. And it's an honor to have you on this show. Today, Jay, we really wanted to talk about the Restaurant Revitalization Fund. The portal opened yesterday. The fund has 28.6 billion dollars in it, Jay, and yesterday what I heard, Mark, was a lot of the restaurant tours were reporting back to me. The portal went wonderful. There were no glitches. That's right. So congratulations, congratulations, sir. So let's talk about the SBA for a minute. You've recently acceded to the director of the SBA, Hawaii. What's your background and what's it like being there now in the second year of COVID? Well, I'll tell you what, Jay, I'll give you my elevator speech in less than 45 seconds. Basically, I came to Hawaii in 1963. My brother was a graduate of UH and a good friend of Neil Abercrombie. So I got introduced to Hawaii as a high school graduate. I then spent the next two years doing a little bit of traveling because I did not want to be a student at that time. And so I then decided to join the Marine Corps in 1965, served here in Hawaii in Vietnam, came back in 70, went to work for three nice locations here in Hawaii. Jay, I'll be honest with you, you probably know the name of Lily Yao. She was pioneer of federal savings. She then, of course, merged into First Hawaiian Bank. I was with one of the three organizations for 17 years. Then I came back to Hawaii in 1987 to work on Han Fed Bank. Han Fed Bank was subsequently sold to Bank of America. And then I went back to the mainland and did my own business for about 17 years. And then I caught Agent Orange impacted colon cancer at take a three-year hiatus between eight and 2011. And in 2012, Jane Sawyer hired me to come and join her at the SBA as the deputy district director in 2012. And when Jane retired, they said, well, why don't we put that old marine to work? And I still wear the uniform today proudly. And I do volunteer work in Vietnam as I help the veterans who would like to get over their PTSD. How did I do, Jay? Yeah, and I would imagine that the uniform still fits you, Mark, right? Yes, it's actually here in my office. You don't have to put it on for the show. It's okay. I was just impaired just in case. Okay, so we're talking today about the Restaurant Revitalization Fund. And it's a grant. It's a substantial grant. Where did it come from? Who initiated it? And where is it going to? It's a good question. Basically, we have four elements of this grant. Number one, the down payment is about 25% of what really we needed across the nation. So 28.6 billion is literally a down payment. The Congressional's here in Hawaii know very clearly that we're going to have to allocate more monies. Those are processes, as we understand it, are in works right now. It was created by the legislation signed by President Biden on March the 11th. And that was designed to deal with a very broad center of food delivery services throughout the nation, whether it's food trucks, tasting rooms, whatever. Even if you have a retail bench, if you will, an attempt on your own farm and you want to sell to the public, you're eligible. Those that aren't eligible are those that are publicly traded restaurants or food delivery systems. Also, it includes, of course, any any eligible food delivery service, let's say, like Ruth, Chris, or an Applebee, so franchise, that would be in greater than 20 locations. Where is it going? It's going to help us restabilize. The industry's been very adversely impacted in states such as Hawaii, where the lockdown has been severe. We do know other districts across the nation have not been as severe. And obviously, the restaurants are doing better. Those states are specifically Texas and also Florida. But with the SBA at the forefront of this process, we're very fortunate to have a very efficient contractor who did the IT support. And that's why Cheryl said yesterday we're well on our way toward a million applications based upon the volume that was done yesterday morning and continues. We expect the money to last probably two and a half, maybe three weeks. And the largest restaurant location can get up to $5 million, but no more than $10 million for an entire enterprise, as long as they have less than 20 locations in their network. This is a grant. It's a grant. I qualify and you send me a check and that's it. I don't have to pay it back. That is correct. Cheryl, you must feel really good about this on behalf of the restaurants of Hawaii. Yes. The restaurants of Hawaii are so excited. Jay, I was with Mark yesterday morning as the portal opened and I was getting text messages, people who are in the portal so excited because everybody, our industry was devastated and everybody's looking for that money. Unlike PPP where in the beginning it was mentioned as a loan, this is a pure grant. There's more excitement around it. Our thanks to the SBA for such a smooth portal opening. And now we're just waiting to hear, as Mark says, when's the next step? Will they be notified where the restaurants receive the funds? How fast that's all going to happen? So what is the next step, Mark? If I did apply yesterday and so forth, what happens now? Yes. In fact, I have one example. Carval here, of course, in our restaurant role location, they applied yesterday just like Cheryl described. They've already got their email back that their application was successfully verified as far as its eligibility. Now, the next step after that, the eligibility email return, I am part of 10 pods across the nation who are going to be doing the review and then the acceptance of the application. In other words, a manual look, but all of the system is designed to take care of 80% of it in an automated fashion. So after this letter or email is received, we then expect a processing time that'll be frugal. By that, I mean, we hope to see it done within a 30-day basis. It really hasn't been tested yet, but I think it's ideally going to be done in a 30-day time frame from the time the application email of acceptance was received. So yesterday, the rollout was simply for people to express interest and put their hat in the ring. Now they have to give details and somebody has to decide whether they should get any money. Oh, with the good news, Jay, at this point, is the eligibility is why Cheryl is excited. All of the documentation that they needed was uploaded. We have done, of course, extensive webinars about what they should do to be prepared for the portal opening. So really, once the eligibility email is received, all of the documentation is already in the queue. So then it becomes a matter of review. So we make sure that there's no any inadvertent misinformation being provided or any fraudulent information that's trying to be perpetrated on the system. So really, when you go to the four, let's say under four-week processing time, which we'd like to say is a target, it really means that the money will be in their bank account as soon as that process of review is done. And that's the good news. It's literally up to 80% systematized, 20% manual review. So the information on which the review is conducted is already there. What I mean is when you put your hat in a ring, now you've done everything you need to do. Now the SBA will look over it and decide whether you're getting money and how much money you get. So what are the parameters for that? What elements do you consider to determine whether somebody gets money and how much? I will keep it simple. We basically are looking at 2019 financial data compared to 2020. The 2019 data will be tax return driven. The 2020 data can be a comfort letter from a CPA or the preparer of the individual entity's tax return with their profit and loss statement. With that type of documentation, you're then looking at a review process merely means that yes, the i's are dotted and the t's are crossed. And when we have that process done, we have about seven steps that the system automates through. And those seven steps are documentation. In fact, if we do a program next week, I'll give you a lot more information as we're going into the system this week. And the 10 pods that I mentioned, one for each region that the SBA operates, I'll be directly involved starting at three in the morning to make sure that all of the applications from Hawaii have been properly documented and properly submitted. Okay, so how much money for the restaurants of Hawaii for Sheryl's constituents, for example? How much money is available to be distributed among them? A good question. If we take a look at the 28.6 billion, there is no state allocation per se. It's first come, first serve. That's why it's very important. And our leadership knows it at SBA and the Congressional's first congressman Caheli and congressman Case and Senator Serona, who we were on earlier with this morning, along with Senator Schatz, all know that they have to work with their Congressional's to replenish the pot. We can't wait for a period like on the PPP last August, it didn't reconvene until December. This has to be an ongoing process. Hopefully, the allocation will be more substantial in the next go around. But the estimate was very simple, Jay. Four times the amount of what was originally allocated to 28.6 billion is what is required to satisfy all needs. That's a lot of bread. So what we have to do, what restaurants in Hawaii have to do is make sure their applications are in immediately. So is it done or are there other opportunities, other time limits for restaurants in Hawaii to apply? I think it's really important that everyone can apply now. Those that are in the priority group and I'll articulate who those are. We have the veteran business owner. We have the women owned small business owner. And then we have the socially, which is minority driven, anything other than Caucasian to be quick ended. And then we have this economically disadvantaged. And we have definitions for each of those and they'll occupy the first 21 days of this opening that started on Monday. Anyone can put their application in if whether they are in the priority group or not that I've just articulated. But the process will be very simple when they do the application. We have had one example. I can share with the group that Nexus Lexus is part of the background verification information that applies to our businesses. And they had to open up additional bandwidth and capacity to take the volume of applications that were coming from the SBA platform. A substantial increase within four hours after the applications were opened at 6 a.m. yesterday morning. That's pretty good. So if I apply and I go through the vetting process and all the process involved, how much money do I get? Is it something I asked for or something you decide or is it just a flat sum? It's a good question. Basically, the calculations will be based initially on the financial data. The award amount is determined in the fourth step of the seven processes that I've identified. And that is where the money that comes to you as an award calculation. Now, if for example, if you've had PPP loans as part of your past performance as a restaurant and many have, then those amounts are deducted from the award that pertains to your financials for the grant. Your idle loan is not adversely affected at all. You can still apply for an idle loan. For example, many of the restaurants we've worked with were capped at 150,000. That limit has now been raised to 500,000. Everyone that was affected in that fashion will get a letter of reconsideration for the amount to be adjusted. But that idle loan amount is not in any way going to impact the RRF funding that you receive. Only the PPP will be deducted if you had a PPP loan. And last but not least, I think the most important factor is dealing with the money coming to you will have gone through a strenuous batting process. And when you look at some of the documentation that's required, we want to make sure that if you're a restaurant not closed, we want to take a look at three months of bank statements. So we know that there's money flowing through your commercial bank account that would indicate that you're still in business. Maybe it's you've been closed until recently and you've been doing a takeout business. We want to be able to show to the reviewers in Congress that we've done our due diligence on the restaurants that are applying. It's really important, however, for Congress to understand 28.6 billion will not cover the need. Just so we extend our acronyms, what is an IDLE loan and what is an RFF? Okay, Restaurant Revitalization Fund, I have a tendency to call it RIF if you pardon my pun. IDLE stands for Economic Injury Disaster Loan and that was the original product that was issued back in March of 2020 followed by the payroll protection plan that followed in its wake. And of course now we're talking about the Restaurant Revitalization Fund. If, for example, another call out, if you had a shuttered venue operating grant request, that would not enable you to be a filer for a Restaurant Revitalization Fund grant. Can't have both. So one of the things you said that I'd like to unpack is if my restaurant is not operating right now, as of the time I filed my application, what have you, or possibly as of the time it is decided, then I don't qualify. I have to be operating a restaurant or the business in one form or another. Is that right? That is correct. And bear in mind, even though we're talking about restaurants, we recognize that many have chosen to operate maybe only on a takeout basis, like in Hawaii, Kai, where I live. Outback Steakhouse almost operated exclusively with the takeout business, but it was a modest amount of their total revenue when you look back at 2019 pre-COVID. So some have even decided to operate very minimal on hours because of the occupancy limits that we have had here in the city and county. So with that being said, if you've even got some shut, as long as you haven't permanently closed the restaurant, hence that's why the three bank statements are necessary to prove that there's still cash flow coming through your commercial bank account. Yeah, it's too bad because some restaurants are de facto closed. That may not be bankrupt or permanent closed, depending on how you define that. And they may be the most needy of all. So what about them? If I tell you, look, sorry, I haven't been operating Mark because I don't have any money left, and I have a dollar half in my bank account, but I really need the money to start up again. Now, as soon as you give me the money, I promise you I will start up and I'll hire, I'll buy food and get started. You still can't help me. No, that's not really true, Jay. And I understand why you might be concerned about that being eliminated. The key thing is you had a 2019 healthy year. Let's make that presumption. There are a number of examples I could give. Let's say your 2020 year was very marginal, very marginal. It's that calculation that drives the award. The only thing they do not want to do is give money to a bankrupt entity that has filed for bankruptcy, either at 11 or 13, or has permanently closed the business and has announced that. If they haven't announced that, and they don't have a BK in the offering, then that party will be eligible. Oh, good. Okay. Well, this is going to have a tremendous effect, isn't it, Cheryl, on the restaurant industry? Given how many members are you, how many restaurants are there in the state of Hawaii, how many potential applicants is Mark going to hear from? Restaurants alone, 3,600, and all the whole state, Jay. And then you count bakeries, as Mark said, it's not only restaurants that may apply for this, right? You've got the bakeries, you've got the farms that have food offerings at them that we don't consider because there's not really like a sit-down, right? Yeah. Yes. Yesterday, as I mentioned, Mark and I were together in the morning, and we could see the volume of people that were so interested in filing for this fund because it is a pure grant. By the way, I would imagine, you know, in the case of the process for the PPP and the like, those loans a year ago, I recall the banks were in the loop, and then you want to make a loan, you have to have a bank, and the bank has to go through its paperwork, and that slowed things down. And there was some criticism about how the banks were favoring their own existing clientele, I recall that. But am I right, Mark? The banks are simply not involved. So you don't have that element of delay or complication or bureaucracy, you're simply going to make a decision and put the money in the account, right? That's exactly right. And I'll give you a little bit more background on the software. The software was created by Summit Group. Summit Group did the original PPP intake platform for SBA in receiving over 5,400 bank origination systems. So after nine months of use, and when the Restaurant Revitalization Fund was announced in early January, that team of bankers, like myself, who has a background in history, really looked at the system and how we can make it proficient. And the effort has been very stellar, as Cheryl had pointed out earlier. The fact is that we tested the system prior to launch, we gave it a logout type of environment. We made sure that the stress was applied to make sure that the system had no fractures, if you will. We really wanted to make sure that the pilot process that took two weeks prior to the launch date could be accomplished successfully. And that's why the program launched yesterday without any material problems other than the Lexus nexus issue that I mentioned earlier. So ultimately, yesterday and going forward, you expect a fair amount, a lot actually, of applications from Hawaii Restaurancy. You've heard how many there are as potential applicants. How does the SBA handle that much traffic? Because that does put a special burden on you, doesn't it? It's a good question. But bear in mind, because of the PPP experience and having now two launches of PPP from April of last year and then again in January of this year, the automation platform is really making the intake much bigger. It's like going from a dial up modem to go to a 500 megabyte system that Spectrum offers. Okay. So that's the difference if I want to make it real simple. Also, I think it's fair to say that when you add all of the elements of the Hawaii agriculture who want to be involved, no matter what it is, whether it's a food truck, or it's a farm that sells retail, or they do a farmer's market, all of those applicants probably from Hawaii alone, if I were to put an estimate out that's been mentioned by others in the local press, we're probably talking about 15,000 applicants here in the state. But when you take a look at how many applicants that were in the system nationwide as of two hours after launch, it exceeded 100,000 already. So I feel that by the time we get to the end of this week, we have been told by the White House that they will prefer to release the numbers themselves, though we are not able to give you any current application status. But we know it is probably in the seven figures as a guest based upon yesterday's crack record. Just a question that comes to mind, Mark. Suppose I have a farm, you mentioned that a couple times, and I have not been selling on the highway, so to speak. But I hear about this, I hear about the fund. And I say, gee, what a good idea. I'm going to sell on the highway right now. Qualified? No. Has to be in historic participation, historic qualification. It has to have a 19 history, 2019 history, tax return in this case in a 2020 comparative. And that's exactly where it really gets right down to. You can't start it based upon the grant program being launched yesterday. It has had to have had an existence. There's three different calculation methods that we can go into detail that Cheryl is aware of, and those that have experienced the process. Those three calculation methods give you variations of the 19 and 20 comparison. I won't go into elaborate detail, but they're available on our webinar that we will be doing throughout the coming days on how to really work with the Restaurant Revitalization Fund. Dana Haunio are people at the Women's Business Center, our Small Business Development Center colleagues, all of them are participating in outreaches that help explain the application process successfully. Yeah, that's my last area of inquiry. So obviously you're interested in getting the public to know about this. You want to have a robust response. You want to have Hawaii get a spare share, I suppose, of the money and apply early. So what are you doing to make it known to the community, the restaurant community, and anybody who might qualify? That's a good question. We're working today, for example, at 10 o'clock local time. We launched a webinar with the assistance of Mary Dale, my colleague who is the outreach and marketing lead for the district. And then we had Dana Haunio from the University of Hawaii. Dr. Haunio was there to give the illustrational examples. We were statewide on that meeting on Teams. And we also included the city and county of Honolulu dealing with Jill Chapman, who of course has been a very critical part of getting the word out. We do have a program, and I'll break it on think tech right here. We're going to be hosting a community navigator. Community navigator will be to enlist a greater number of nonprofits so we can become more granular in the community of sharing not only the restaurant revitalization fund, but also other programs that perhaps haven't reached down to those that are underserved, no matter what the island, whether it be Kauai on the North Shore, or if we go to the upper northeastern coast of the big island, we're going to have a greater number of people in the field. I as a retired Marine called an operation footprint, and we're going to expand the SBA footprint in ways that has not been done in recent years. And frankly, we couldn't do it without community navigators, or we call community partners. And that'll be a program that you will see launched and officially identified and funded by Congress in the month of May. And we're going to expand the name of our district to Hawaii Pacific Island District office because we're going to cover all of those areas that Cheryl mentioned at the top of the broadcast and where we have not had a presence. And now we are going to have a presence. This Marine will go back to areas that he saw many years ago. That's great. Great. Well, across the Pacific, it's so important that we reach out for them. I take it also from what you said that nonprofits who deal in food distribution also qualify. The nonprofits don't qualify in that regard where they're going to qualify as helping and getting the actual allocation, Jay, that's been done by Congress. Now the regulations are being written is a $100 million allocation to help community nonprofits get involved with the SBA's message. And that is more than just food. It could be anything the nonprofit does to help the community. Right. Okay. We got to talk, Mark. We got to talk. Okay. So what about your website where people can look and apply? What is it? What's your website? The best website really for the restaurant program is restaurants. That's plural. SBA.gov. That will go straight to the landing page within the SBA.gov website that will give them the information they need and the necessary knowledge information to do a successful application. Also, as we did with the Blaisdale yesterday with Cheryl, we were working hand-on, first-on, one-on-one relationships where our counselors were there and will continue to do that as demand, of course, is experienced. I think beyond that, what we do expect within the community navigator program is not only to talk about restaurant revitalization, but also talk about other areas where funding and access to capital can maybe be explained in greater ways that has not been done. I'll go back maybe 10 to 15 years by our agency. We are committed to make a difference in our communities. Oh, that's great. And so is Cheryl. And I wondered, you mentioned your partners out there you are collaborating with in the community. And I guess what you're also telling me is that the restaurant association, the Hawaii Restaurant Association, is one of your partners. Cheryl is one of your partners. Absolutely correct. And we have found that others have asked to come and get involved, the Women's Business Center. We want to offer technical assistance under the community navigator program. So we just look forward to bringing a lot of nonprofits into our O'Hana. That's great. Cheryl, this is all great. It's good for the restaurants for sure. This is really going to put the restaurants back on their feet, I think. And I'm happy to hear about it. Thank you for discussing it with us. Cheryl, can you talk about what it means to the Hawaii Restaurant Association, what it means to be a partner with the SBA on this, and your website, what you're putting on your website and the activities you're engaging in in order to advance the program? Yes. On our website, we'll be having the link to the SBA website. We would like to thank the Small Business Administration, Mark Spain specifically. This gentleman, you talk about the Ever Ready Bunny. He is constantly out there on these webinars. Yesterday, I think his day started at 3 a.m. When I saw him at 5 a.m., he was going strong. And it's because of partnerships like this. And as we know, our restaurant industry and food service industry was devastated. So this $28.6 billion we get will go quickly. So as you said, we want to work with our national delegation. We want to thank them. We want to thank President Biden for approving this. And we really want to thank Mark Spain and the SBA for our partnership, because it's been so refreshing and so wonderful to have a partner like the SBA. All true. All true, Cheryl. It's really wonderful to hear about this program. It's a new time. A lot at the end of the tunnel. It's going to mean a lot to Hawaii. Hawaii has so many restaurants as part of its hospitality industry, but also as part of its social fabric, as you know. Well, I think, Cheryl, this is a great show you've put together. I really appreciate it. And as I said before, we started, you are indefatigable to the point where you may want to consider listening in the Marine Corps and appreciating what Mark is talking about. Thank you, Mark. By Mark Spain, Cheryl Montzvogue, a really wonderful discussion and a great program. And I hope people make advantage of it as they should. Aloha.