Paycheck Protection Program

Overview of the Paycheck Protection Program

A COVID-19 federal relief bill that was signed into law on December 27, 2020. This bill includes funding for another round of the Paycheck Protection Program. This program is administered by the Small Business Administration (SBA) and is intended to help small businesses keep their employees on payroll. The Paycheck Protection Program provides forgivable loans to small businesses to cover payroll and other eligible expenses.

There are two ways businesses can benefit from this new round of funding. Businesses that did not previously participate in the program will have an opportunity to apply for a “first draw”. Businesses that received funding through PPP in 2020 will have the chance to apply again and receive a “second draw” of funds.

Who is eligible? To be eligible for this round of funding, businesses must meet the following criteria:

• * The business must have 300 or fewer employees.
• * Business must have experienced at least a 25% reduction in revenue.
• * Businesses who received funding through the Paycheck Protection Program in 2020 are eligible for a “second draw” of funds if they meet the above criteria and have used or will use the full amount of their first PPP loan.

What are the benefits? Eligible businesses can apply for loans of up to $2 Million. The amount of the loan is calculated based on 2.5 times the average monthly payroll cost for the business from 2019*. For businesses in the Accommodations and Food Services sector (categorized by NAICS code 72), the loan amount is 3.5 times the average monthly payroll. The funds can be spent over a period of up to 24 weeks.

What are the terms for loan forgiveness? Businesses that are funded through this round of PPP are eligible for full loan forgiveness if during coverage period they meet the following terms:

• • Employee and compensation levels are maintained;
  • The loan is spent on payroll costs and other eligible expenses; and
  • At least 60% of the loan is spent on payroll costs.

How to Apply? New applicants can begin applying on Monday, January 11^th. Businesses who previously received funding through PPP are able to apply for a “second draw” loan beginning Wednesday, January 13^th. Businesses apply for the loan through a participating lender, not directly through the Small Business Administration. 

Local lenders who are confirmed as participating in the program include: 

• Kauai Government Employees FCU (KGEFCU) – accepting applications 1/11/21
• Hawaii USA Federal Credit Union
• Central Pacific Bank
• First Hawaiian Bank 
• Gather Federal Credit Union
• Bank of Hawaii
• American Savings Bank

KGEFCU is currently accepting applications. Other credit unions may begin accepting applications 1/15/21. All lenders will be able to accept applications starting 1/19/21. 

Changes to this round of the Paycheck Protection Program: This round of the Paycheck Protection Program involves some changes: 

• * To be eligible for a second draw, a business must have no more than 300 employees.
• * The maximum loan amount was reduced to $2M (compared to $10M previously).
• * Additional businesses will be eligible for this round, including 501c6 businesses.
• * PPP borrowers are now eligible for Employee Retention Credits as well.

Resources

• Overview of “First Draw” PPP loans – Guidance from SBA updated Jan 8, 2021
• Overview of “Second Draw” PPP loans – Guidance from SBA updated Jan 8, 2021
• Application for “First Draw” PPP Applicants – updated Jan 8, 2021
• Application for “Second Draw” PPP Applicants – updated Jan 8, 2021