Hawaii establishes start-up business loan program with new fund and guidelines

On February 12, 2025, the Hawaii Senate introduced SB983, a legislative bill aimed at bolstering support for start-up businesses in the state through a structured loan program. This initiative seeks to address the financial challenges faced by new enterprises, particularly in securing necessary funding to launch and sustain operations.

The bill outlines a framework for a Hawaii start-up business loan program, which will provide loans up to $50,000 to eligible small businesses. Key provisions include a maximum loan term of eight years, a fixed interest rate of four percent per annum, and the possibility of deferring interest payments for up to 24 months. Notably, the bill stipulates that loans will not require personal guarantees from recipients, a move designed to reduce barriers for entrepreneurs seeking financial assistance.

One of the most significant aspects of SB983 is its provision for loan forgiveness. If a small business declared bankrupt within five years of receiving the loan is domiciled in Hawaii, the loan will be forgiven, thereby offering a safety net for struggling entrepreneurs. This provision has sparked discussions among lawmakers and stakeholders about the potential risks and benefits of such a safety net, with some expressing concerns about the implications for state finances.

The bill also establishes the Hawaii start-up business loan program special fund, which will be financed through legislative appropriations, loan repayments, and interest payments. This fund is intended to ensure the sustainability of the loan program, allowing it to continue supporting new businesses over time. The Department of Business, Economic Development & Tourism will oversee the fund and is required to report on the program's activities annually, ensuring transparency and accountability.

As the bill progresses through the legislative process, it has garnered both support and opposition. Proponents argue that SB983 is a crucial step toward fostering entrepreneurship and economic growth in Hawaii, particularly in a post-pandemic recovery landscape. Critics, however, caution against the potential for increased financial risk to the state and question the effectiveness of loan forgiveness provisions.

The implications of SB983 extend beyond immediate financial assistance; it reflects a broader commitment to nurturing small businesses, which are vital to Hawaii's economy. If passed, the bill could pave the way for increased innovation and job creation, while also addressing the unique challenges faced by start-ups in the state. As discussions continue, stakeholders will be closely monitoring the bill's evolution and its potential impact on Hawaii's entrepreneurial ecosystem.