 Good morning everybody, this is Jay Fiedal here on Think Tech. We have community matters and more specifically we have Jane Sawyer at the SBA because we like to check in with the SBA every now and then and find out how things are going. If you didn't realize that the SBA is central in our recovery, our reopening and all the programs, the CARES Act for example, a good part of that is administered through the SBA. So we want to know how things are going as the reopening takes place. Although there's a real question I might add that if you read the morning paper we're now in a number of states within what they call the pause. The pause is sweet, you pause the reopening. We're going to have various various chapters on this book. Good morning Jane, so nice to see your smiling face. Oh good morning Jay, it's great to see you too, thanks for inviting SBA along and hearing a little bit about this CARES Act journey and the PPP and the IDLE and all of those other great acronyms. Last time we spoke you were being deluged with applications for PPP and PPP money coming in and that was well about several weeks ago I guess six weeks ago maybe and I'd like to you know take up where we left off and get an update so people know what the SBA is doing and how these programs are doing okay. Well you know it's these programs have been just like the COVID-19 pandemic itself very uncertain changing every day sometimes multiple times within a day but the important factor is that we're trying to get money out to help small businesses and help those employees who aren't working, who've been furloughed, who've been laid off businesses that are on the brink of closing because there are no customers or the government has shut them down so CARES Act put a lot of money out there and SBA together with Department of Treasury was charged in following the intention of Congress and getting the money out to small business. The biggest program is the PPP the Paycheck Protection Program loan that goes out to small businesses non-profits all who have been impacted by this pandemic and unable to continue to do business or the customers or the employees had to go home. PPP particularly and this is important distinction PPP was designed to help keep employees on the payroll, in pay status and keep businesses open so that's it's a quick turnaround loan made through the banks 100% guaranteed by SBA the federal government with the forgiveness phase if you use the money as intended initially it came out and it was 75% of the proceeds of the loan go to payroll the other 25% could be used for some of your fixed costs that you weren't able to pay such as rent mortgage interest utilities things along that line so it wouldn't replace revenue but it would help you keep the lights on and the doors open employees paid. So can you give us some metrics about how many applications have been received and processed in Hawaii and how much money has passed hands to the people you know who are the beneficiaries of the program? Since this program didn't you know you had to be eligible as a small business meaning that you had to be in business by February 15th this year you had to be operating you had to have payroll you also had to have under 500 employees who reside in the United States so it is for US businesses. I can't tell you how many applied but I think probably if the applications went through all of our local banks and many of the credit unions were participating and also many fintechs were involved in this program this year we have made as of last week 11,657 loans in Hawaii for over 675,661 400 loans to small businesses for the payroll the loan program will remain open and there is continuous money if you remember a lot of drama a lot of fast-moving action when this program launched on April 3rd April 2nd April 3rd after Congress approved the act took about a week for SBA and the Treasury to cobble the requirements together and get the first applications out to the banks our banks in Hawaii were very very responsive and even in that first tranche it lasted about two weeks and SBA loaned all the money at that time which was like 350 billion dollars went out across the country but we got a good portion of that to Hawaii. Second round came out some of the changes to make the act more flexible because any kind of business can any small business can apply for this and you can also be a sole proprietor you can be an independent contractor LLC and as I said a 501c3 not-for-profit agency can apply for these loans as well so we've seen a lot of um you know Aloha United Way, Hawaii Theater, Hawaii Symphony, Iolani Palace all of these organizations have applied and been awarded PPP loans. That raises an interesting question that's been some discussion in the national press about where the cares money has gone it's not clear where some of the you know big amounts have gone um and that may be subject to freedom of information information act later but is is it public who is getting the money? Since there's been so much just in you know involved in making the loans and getting the things together we don't have a great database to say start disclosing who's gotten the money it's not like we're hiding it it's just managing this massive amount of data at the same time we're really focused on getting the money out initially there was a lot of publicity about some publicly traded companies for example who had applied again this criteria is very very broad and it's up to primarily the borrow work to make the a forthright and good faith certification that their business is number one eligible based on the size standard and the type of business that they are that their employees are in the United States that they also need the money um so they don't have other available assets that will sustain their business through the time the term of the pandemic which at that time we were thinking would probably be closures of about three weeks now we're beyond three months or about three months and going beyond that particularly if we're in a pause or you know um you know a rebound uh and things like that that businesses may close again this is just unprecedented nobody saw this coming and nobody thought we were as ill-prepared as perhaps we have been across the country and across the globe so that's that's made it very very hard and so some of those larger companies I mean some of the notorious ones we heard about were like the Los Angeles Lakers and we have seen many companies that feel that since they meet that 500 employee standard they should be and their business with employees in the United States they should be allowed to apply but then again they have to meet in about eight or nine different certifications as part of their um loan loan documentation uh this will also go so if they've gotten a loan they have to then move ahead to use the proceeds as prescribed by the loan or employee payroll including those costs and initially as I said 75 a recent uh flexibility act that was passed the first week of June now changes that 75 25 to 60 40 and extends the period that you the covered period when you can use those loan proceeds from eight weeks to 24 weeks so almost to the end of the year um for many businesses so we're seeing some complications come through as people are as small business owners are spending that money and then they get to apply for forgiveness because either all of that loan or a portion of that loan can be forgiven by the government and will be paid to the bank so that the small business owner isn't carrying any debt so that's the next step so even though we'll accept the last the last loan a clay application will go through next week June 30th 1159 p.m then the system shuts down unless congress changes things again but we're not we're not looking at that right now we think that we'll play out this first phase shut it down and assess because there is about 120 25 billion 125 128 billion dollars left in that loan fund so if there are any businesses out there small businesses sole proprietorship innovative businesses you know if you've been in business since February um you look back at your payroll go to sba.gov click on the yellow banner at the top get the details get the application send it in and again right now um because that money's available see if you can get approved for a loan um and then it is you know making good use of the loan over the next up to 24 weeks i'm so glad you mentioned that i'm there i'm sure there are people out there that would benefit by hearing it and i think in in many cases because there was such a rush our banks were swamped we've made more loans in the last three months than we have made in the entire 28 years i've been with sba and particularly local banks one of the local banks that is one of our leading lenders makes about 100 loans a year um they've made over 6 000 loans in three months so this is a lot of money to move out a lot of loan paperwork to take care of and a lot of rules to follow so we're moving into the next phase if you haven't gotten a loan from one of those banks so they didn't get to process your application i would say take a look at maybe some of the fin tax because if you aren't a customer with one of the banks they may not consider your loan or it may not be a sizable loan so the fin tax are still processing cabbage paypal um many of those you can just google ppp loans and uh see who's making those then just carefully follow the instructions do so before june 30th because you have to have the the um lender has to approve your loan sba has to stamp it and give it an approved loan number before 11 59 p.m on june 30th that's coming up very quickly that's like a week away yeah it's just under a week away so it's very quick now is it possible to get all that done in a week you think well we've we've heard um anecdotally and in some um magazine reports and things that they're processing the fin tax are going through the loans and giving you approval in 48 hours so um it is you need to have some of your documentation available a small business owner has to determine what his monthly payroll is and the application form will tell you how to calculate that directly for purposes of the ppp loan then you multiply that by two and a half times and that will give you what your um possible or likely loan amount should be um it will cover payroll for employees including the owner whatever you've paid yourself depending on what schedule you use to pay taxes because that will be your look back and you determine what your monthly take is you can add other payroll cost per employees so things like um if you their healthcare cost um their uh you know leave payments and things along that line you can state taxes can also be factored in there with payroll costs two and a half times that and that's the number that you get and again 60 of your pro loan proceeds go to meet payroll over the covered period which follows the disbursement of the loan so that you can get some money to your employees get them back and help you get ready to open up that deep cleaning that you might need to do installing the barriers putting up signage those kind of things get ready to open up or open up and uh get your employees off uh unemployment and back in uh on the payroll yes so um does does the word employee include independent contractors does it include key independent contractors should probably should won't be included there by the business that pays that independent contractor an independent contractor should apply on their own ah okay so since they would file their taxes on their own and things like that can you give us a sort of a list of the things you have to do for forgiveness and by when okay forgiveness is basically a documentation of um how you have spent the proceeds of the loan so as you make payroll you would keep you know copies of the checks if that are the ACH transfers if that's how you make your payroll any calculations of those costs if you use a PPO for example we're getting way too many of these PPO PPP PPE um but if you use someone who helps do your payroll you can use their report um to substantiate and support that you paid those employees um it has to be for that covered term and you have to keep most of those employees on your payroll so if if in February you had 10 employees you should be showing that you had 10 employees and that if you had to reduce their payroll costs to say extend the time that are you know the type of work they're doing they don't have to be doing exactly the same duties they don't have to be in the business but they have to be paid and they have to be considered um your employee and on your payroll so you have to show that you paid them at least 75 percent of the pay that they were getting before you have to get back up to the number of employees there are a lot of specific rules and they're again fast changing June 5th June 6th 17th June 24th we just had some new interim final rules again you can find those all at sba.gov or at the Treasury website under the COVID-19 response and it's extensive it's hard to keep up I think they're about 16 IFRs now so and just changing the rules but to certify after you finished your after the employer has finished their covered period whether it's the first eight weeks or they've decided to extend to the 24 and they've exhausted their funds they gather all the data to complete a form an application form that goes to their lender the lender will check their calculations um see that they've certified on the form it's usually they just redid the forms and there is a easy form just like think think 1040 think your tax forms they're very very similar there are a couple of worksheets that are involved to help you get to the numbers you actually plug into your form the bank can ask you for some of those documents or that certification and you will send it all to the bank they'll take a look at it and they have a period of time I think they have 60 days to review your your um application for forgiveness to determine I mean even if you work on this loan you don't have to make a payment on the loan for at least a year so it's not happening right away um you will have some interest accruing um on the loan and then you have a two from the time that you've taken the loan you have a two-year term to repay the loan at a very very low interest rate um and I'm trying to remember if they've changed that now or or um but it's it's a very very low interest rate it's gone right now from my mind but uh you know the critical factors are trying to slip away as we've gone through this um well yeah it changes and it's uh it's everything is immediate and you're you run a uh a speedboat journey over here so our question is uh you in other words is a calculation of the forgiveness it's not all or nothing no it's not all or nothing to the extent you comply with these requirements then you get a calculation based on that mm-hmm yes okay now what about SBA itself I mean you you started off you had no idea that Congress is going to do this and as you said in 28 years you haven't seen any kind of volume anything close to this so clearly what what did you do in your office did you hire extra people uh did you uh you know and at the same time there's the office threat right there's this threat of COVID for your staff and you want to protect them so how did you reorganize yourself in order to deal with 11,000 transactions in a very short period of time well I think the the biggest thing is like every other business in Hawaii um we had uh the challenge of um how we remain to open so we did do most of our work remotely and this program isn't the only one that we're running simultaneously so we continue to do uh and meet the compliance requirements of our government contracting programs which include the 8a program uh that added a few new factors too because a lot of the government contracts were also shut down because facilities were closed so we had to deal not only with 8a annual reviews but temporary suspensions um because it's a time sensitive program so my business opportunity specialists um were also working remotely from home so we had a very core staff in the office because particularly with this program we're considered essential business but most of the staff worked from home we did um keep the lights on but the doors were locked we had had a tremendous number of calls and the rest of my team or all of my team was actively involved in servicing phone calls customers who didn't know what to do customers who were dealing with problems sba also was making all the loan payments we had debt relief going on for cus those ongoing customers who have regular sba 7a and 504 loans so those loans because of the cares act were also being paid by sba to the banks so any of our our lenders who were servicing or collecting on an sba portfolio from the last two to three years was processing payments incoming payments from the sba to cover those borrowers um they were also still potentially closing deals even though a very very small number of deals going forward because they were all having adverse impacts from this pandemic as well when i get when i get out with this is that your staff was still available and is still available to answer questions so you describe these forms uh they have to be filled out both both for the loan and uh or for the forgiveness later and uh am i right to say that sba will help people who have questions about these forms and and how they go through the process am i right about that yes yes that we we have staff on and we're training the lenders on this program because obviously um this ppp loan program defied anything that we've ever asked any lender to do um because you just throw all your credit principles out the window we aren't checking credit we aren't checking assets we we are verifying um that they are in business or asking the borrower to attest to that but the the bank didn't have to evaluate for well they had to look at proposals but not with the care and credit analysis that they would normally do right so it was very very different from them and they went on double shifts to meet that demand and get those things on my next question which is um you know there has to be problems in a program of this size we're talking about trillions and there have to be scammers out there yeah people who step in and false identity and try to get the you know the money improperly criminally wrong and they have to be bureaucrats in washington whatever agencies are involved in in making rules that don't work in processing whatever they need to process too slowly at a time when everything is is emergency and i wonder if you could comment to the extent you can comment on that if you can tell us the the dark side of this there had to be holdups and there had to be scammers and there had to be problems what what were they i think that we're still we're still seeing some of that because yes when you see a program that is as broad as this and is meant to help as many people as possible there are going to be some of those bad players who are are going to um push the rules or or try and get through we have had um some investigations some have been very very obvious uh people that are not eligible um applying for the loans and actually getting funded and uh accepting payment so there are some checks and balances along the way we've had reports and they are sent to the inspector general's office at sba for further investigation if there's something that comes to our attention we're notifying people um people in the community who see um something that they feel is not correct are notifying the agency um there have been arrests made there have been people who have uh as they become aware you know um because the burden is going to ultimately be on the borrower and the sba and the treasury have determined how they're going to look back at these loans because some of them are quite large so they are evaluating and examining both the eligibility and the certifications that come in from the borrowers so there will be um as as the both in the loanmaking process they're evaluating eligibility particularly with the larger loans um two million and over um there are big checkboxes on the certification forms that will automatically send those forms into or those requests in for an audit um we get irregularities that are reported by the banks that receive those applications thankfully um they are paying attention and they want to be correct because they don't want to have a loan application who's um either they're guaranteed or their forgiveness is denied and they might not be getting the reimbursement because the loan the bank is lending their money we then on evaluation are um paying them either on the guarantee or for the forgiveness as the loan is processed so it goes through several stages because anything that's not forgiven uh in a loan for an individual borrower turns turns into a loan that the bank then has to process or the remainder of the two-year term. So Jane looking forward let's let's take a snapshot if we can I mean it's hard it's hard to look forward in a time where everything is changing but looking forward let me see if I understand the parameters here um okay on the on the 30th of this month application that's the last application so after that no more applications under the current arrangement okay but there's still money there's several hundred would you say 600 billion dollars that haven't been spent under this program. Well that's 128 billion right now. Sorry 128 billion. The total amount has been 600 billion but the 128 I think some because of some of these uncertainties people don't know which way to go. So why cut it off on June 30 if there's 128 billion left that hasn't been hasn't been processed hasn't been spent under the program. Why not extend the deadline do you think they will? I'm not sure they're going to extend the deadline right away they're talking about doing a couple of different things and it may be redirecting the loans to say underserved sectors or perhaps those that are hurting the most they did make some special considerations for some of the smaller businesses there have been some special considerations for ag related business. There have been some different considerations for the lodging hospitality restaurants that have been unable to open across the country so it could be that there will be that money will be set aside or moved to a different program. They kind of may take a break and do a short reset to see when is the country traveling again and what can we do to to support tourist related businesses because they've been shut down the longest. We have various issues that are going to come up for example we're talking before the show about the pause now they call it the pause in California Texas one of the state I can't remember Florida and maybe others to follow so if you have a spike and they do in those states then governors are considering pauses in the reopening. This means that a business that has had PPP money may be under pressure it may be locked down again it may not be able to do business again and that affects the forgiveness I think at least the calculation of the forgiveness of also I remember that the original amount of money in total was 2.3 trillion and then there was a second bill a couple weeks later for another several hundred million billion dollars after a while it gets to be real money and so the total is something like three trillion dollars right now and they stop there they haven't been able to agree on a further tranche beyond the three trillion so the question is what do you see going forward because we're not we everybody agrees we're not out of the woods there may be a pause that will you know confuse and complicate things do you have any idea of what's going to happen if we have a pause and if we go into you know a kind of combination of resurgence and pause resurgence and pause ripple effect economic process going forward what do you have any idea what's going to happen what's going to happen to this program I think it could be reimagined a little bit I think we will have a pause for the program where they decide if they should break up the chunk of money to some specialized uses or transfer it to another program for small businesses even after June 30th we still have available the economic injury disaster loan program that's administered by SBA as well and they have that portal is open that that loan program can fund forced eligible small businesses more working capital needs so it has broader uses so you could pay vendors you can still now you're in a different term you could still make payroll you can pay rent you know things along that line that could help you during the reopening of your business as well because it helps you meet the cost that you're unable to pay because of the the loss in revenues due to the pandemic that program is still available some of that 128 billion could be transferred there to help us be able to meet more of those needs some of the money from PPP could be redirected there are also programs that small businesses can can apply for with the department of labor with the department of taxation state and federal that will also help them in other areas so it's great to go out and talk to or get on one of the webinars with SBA we'll be doing a lot on recovery coming up so go to SBA.gov backslash hi to find out about those programs or call our office somebody will call you back eventually when we pass all those calls along to those remote workers and we did get a little bit of extra help at the office because we know that now a lot of it's time to put the big boots on because a lot of the work starts now as we get the money out from this program that SBA is ready to help. Jane I know you you would derive a certain amount of gratification from helping the business community that's so for all the years all the years I know you but but now this is special and you must have a certain special amount of gratification going forward that you are central in the reopening and central in saving restoring our economy I mean how do you feel about your job these days do you like your work? Most often Jay I love my work particularly when we can really be getting something done for small business so I think I I'm hoping that I'm going to feel very very gratified when we get through this but it's going to take us a while to see the real results I'm really pleased that we could work with these with so many lenders to get the money out and they did an extraordinary job I'm just so thankful for them that they stepped up Central Pacific Bank American Savings Bank First Hawaiian Hawaii National Bank of Hawaii some of the smaller credit unions they just did a great job doubling up shifts getting their loan officers you know into the banks working around the clock virtually so I couldn't get my people to do that but they did do some really long hours and we really kind of you know particularly when so much is unknown it's sometimes hard to to reach out but everybody really dug in to try and work together and that's still we still have a ways to go yeah thank you Jane Jane Sawyer SBA and if you want to know more it's SBA.gov thank you so much Jane for showing us. Thank you Jane. You take care. Take care. Stay safe. Aloha.