Jim Medeiros (left, with sunglasses), owner of Kuleana Consulting, and his work crew restore the ancient Ala Kahaki National Historic Trail on Hawaii’s Big Island. The cultural consulting company received $33,000 in Paycheck Protection Program loans after work stopped during the pandemic. (Photo by Jeremiah Valenzuela/Kuleana Consulting)

As visitors disappeared from Hawaii’s beaches in late March and job losses reached historic highs, local employers worried they wouldn’t get their share of federal Paycheck Protection Program loans.

“We were paranoid,” said Rich Wacker, president of the American Savings Bank in Honolulu. The money to help with payroll and other bills was first-come, first-serve, and Hawaiians feared big mainland banks could get all the money first.

“We knew we had to rely on ourselves, so it was all-hands-on-deck to make sure we didn’t get shut out,” said Wacker.

With no branches of the so-called Big 4 banks (JP Morgan Chase, Bank of America, Citigroup and Wells Fargo) in Hawaii, local banks had teams of employees waiting to punch in applications when the loan system went live around 2 a.m. on April 3, said Neal Okabayashi, director of the Hawaii Bankers Association.

“Some banks were working 24-7 and moving people from their normal jobs to making PPP loans. Anybody who could keypunch, from auditing or risk management or even human resources,” said Okabayashi. “Finally, after the first five or six days, they said you could take Sunday off.”

Such smaller, motivated banks played a big role in the PPP program, experts say, helping to explain why some states far from the early coronavirus epicenters in New York and California received the most help from the $669 billion program, including $320 billion added in a second round, that ran through August.

“Some people were lucky to get banks that were efficient about getting the loans out, but they were not necessarily in the places with the greatest need,” said João Granja, an associate professor at the University of Chicago and co-author of a study of the efficacy of PPP loans by the National Bureau of Economic Research, a nonprofit research organization.

The program gave employers up to 2.5 times their monthly payroll in loans, and allowed those loans to be forgiven provided employers avoided layoffs and used the money to pay their employees and rent or mortgage.

According to a Stateline analysis of Small Business Administration data, Florida and Hawaii had the largest proportions of incorporated businesses that received loans, around two-thirds in each state. More than 60% of all businesses in Connecticut, Georgia, Louisiana and Mississippi received loans. (Unincorporated businesses such as partnerships and businesses owned by a single person were analyzed separately.)

At the other end of the spectrum, fewer than 45% of businesses in Alaska, Delaware, New Mexico, North Carolina, and West Virginia received help.

Generally, large banks were slow to start processing PPP loans, Granja said, opening the way for smaller and regional banks that acted faster in some states.

In Mississippi, for example, more banks are local and regional, and they are more likely to know the small businesses and offer to help, said Gordon Fellows, president of the Mississippi Bankers Association. Many loans were for a few hundred dollars to pay rent or utilities, and the most common recipients were restaurants, churches and beauty salons.

“Having local banks matters,” Fellows said. “We have more bandwidth than [other states] do. People don’t think of Mississippi as a regional banking center, but we are.

“To me, the pandemic was an economic crisis as much as it was a health crisis,” Fellows said. “PPP was like a defibrillator that stopped the damage so we could go on.”

Mississippi had the lowest average loan amount, about $66,000. Michigan had the highest, at about $125,000.

Fellows said it’s not surprising that some loans went to businesses whose employees ended up being able to work at home.

“You have to remember [that] at the beginning of the pandemic, nobody knew what to expect,” he said. “It looked like the biggest crisis ever and nobody knew where it would stop.”

Florida was an exception to the small-bank trend, as Bank of America handled the most loans there, although most came in the second round starting in late April when the big banks’ programs were up and running. Bank of America has more than 200 branches in Florida.

Many small businesses and organizations in Florida heard about the program launch and signed up immediately, said Christopher McCarty, director of the state Bureau of Economic and Business Research at the University of Florida.

But Bank of America didn’t process the loans nationwide for another week because it and other major banks wanted to develop a system to upload loan application documents for further scrutiny.

By that time money was already running out. The first $349 billion was exhausted in two weeks, and Bank of America pushed fewer than 10,000 loans through in that time despite hundreds of thousands of applications in Florida and other states. With more preparation, the bank processed more than 300,000 loans in the second round that started April 27.

The first round of funding was chaotic, with little time to prepare, and small banks were able to manually punch in loan applications while the big banks planned their response, said Ian McKendry, vice president of public relations of the American Bankers Association, a trade group.

But the second round helped balance things out, he said, and generally most businesses that wanted a loan were able to get one, he said. The program ended in August with $130 billion unspent.

“The fact that there was $130 billion still on the table tells you that anybody who wanted one probably could get one,” McKendry said, citing a National Federation of Independent Business survey in May showing that 80% of its small-business members had applied for PPP loans, and of those 90% received one.

The survey found that about 28% of recipients were having trouble maintaining required staffing levels without paying back the loans, while another 38% were having trouble spending the money within eight weeks, also a requirement.

As it turned out, about 90% of the jobs protected by PPP loans did not need protection and would have survived anyway, according to the National Bureau of Economic Research study, which compared businesses that received loans to those that applied but did not get them before funds ran out.

Still, the program undoubtedly saved some jobs and even where it did not save jobs, it helped some businesses, said University of Chicago’s Granja. The injection of cash for rent and other bills may have allowed some companies to stay open.

Some small businesses needed the money desperately. Larry Bagnera, the owner and only employee of his LaVilla Jewelry Store in Revere, Massachusetts, received $15,000 in PPP loans using the regional Citizens Bank.

“That money helped, it helped a lot, but it went fast,” Bagnera said. “I’ve gone through my life savings and after 27 years in business I won’t be able to stay open much longer.” Store hours are limited by coronavirus restrictions and customers are afraid to shop, he said. 

In most states, full-service restaurants were the most common recipients by sheer number. In Florida and Hawaii, real-estate offices, which often handle vacation rentals in tourist destinations, were the most common, the Stateline analysis found. In Maine and Alaska, fishing-related businesses topped the list. Farms and ranches were the most common recipients in Iowa, Kansas, Montana, Nebraska, North Dakota and South Dakota.

Unincorporated employers such as farms and law or medical partnerships also received loans. In farm states North Dakota and South Dakota, 12% of unincorporated businesses secured loans,a Stateline analysis of loan and tax return data found. Cattle ranches in South Dakota and grain farms in North Dakota were the most common recipients.

In New Mexico, restaurants, law firms and dental practices topped the list of recipients. But only 41% of businesses in the state received loans.

New Mexico worked hard to publicize PPP loans through a business relief hotline, webinars and advertising on social media and television, said Bruce Krasnow, a spokesperson for the state Economic Development Department. But New Mexico has less banking access than some other states.

“New Mexico has a lot of small-small businesses that do not have strong banking relationships,” Krasnow said.

Hawaii had no problem recruiting small businesses, Wacker said. “There was general recognition that the visitors were going away, and everybody knew what that meant for a place like Hawaii.”

One of the Hawaii companies looking for help was Kuleana Consulting, which helps developers preserve sacred Native Hawaiian burial grounds and other historical artifacts during construction. Things looked dire in late March and early April.

“Development was at a standstill. We were very skittish about what was going to happen to us going forward,” said Jack Kelly, who helps the five-person firm with accounting and other services. Kelly applied the first day PPP funds were available, but despite the efforts of the local First Hawaiian Bank, PPP funds ran out before the firm’s application was approved. The company was forced to lay off its five workers.

Despite the layoffs, Kelly was happy with First Hawaiian Bank’s support. “They were very good, they always answered the phone and gave us answers,” Kelly said.

The $33,000 finally came through in the second round of funding in May. By that time it was sorely needed, Kelly said, because the company needed to rehire and pay its workers for new projects and money was running out.

“We were forced to take a month off. That month was expensive. The bills keep coming,” Kelly said.

Tim Henderson is a staff writer for Stateline, an initiative of The Pew Charitable Trusts.