The COVID-19 global health pandemic is proving to have long-reaching economic effects. The New Jersey Economic Development Authority has introduced a multitude of programs to provide aid to New Jersey businesses. The programs are tailored to assist small and medium sized businesses in a variety of situations. Genova Burns has compiled the most recent offerings from the state to keep New Jersey working.
Implementing recent legislation, the New Jersey Economic Development Authority (“EDA”) announced new programs in aid of businesses impacted by Covid-19. These are:
Small Business Emergency Assistance Grant Program (EDA Grants)
Grants of $1,000-$5,000 (based on $1,000 per full-time employee up to the maximum of $5,000) are available to employers with 1-10 full time employees and whose business is classified within NAICS categories 42, 43, 71, 72, 811 and 812.The grant funding is targeted for unrestricted payroll and working capital support and cannot be used for any capital expenses, including construction. In order to qualify, the business must agree to exercise best efforts not to furlough or lay off its employees through 6 months after the end of the COVID-19 emergency and pledge to rehire already-furloughed or laid-off employees.
Small Business Emergency Assistance Loan Program (direct loans from EDA)
For businesses with less than $5M in annual revenues and significantly impacted by the COVID-19 outbreak, EDA may provide loans of up to $100,000 at 0% interest for the first 5 years and thereafter at NJEDA’s prevailing interest floor capped at 3%. The loan proceeds are intended to cover operating expenses and ensure continuity of operations during the outbreak. An applicant must demonstrate an ability to meet a global debt service coverage ratio of 1.0, and certify that it will exercise best efforts to not lay off or to rehire employees as soon as possible. The loans are expected to be subject to a 10-year amortization with a possibility for deferred payments for 12 months. Applications will be considered by the EDA on a rolling basis, commencing March 30, 2020.
Small Business Emergency Assistance Guarantee Program (loan guarantees by EDA)
For NJ based businesses in operation for at least 1 year, with less than $5M in annual revenues and significantly impacted by the COVID-19 outbreak, this program provides up to $100,000 (not to exceed 50% of the loan or line of credit amount), as a first loss guarantee of permanent working capital loans and lines of credit originated by “Premier Lenders”. A listing of the 24 current EDA Premier Lenders is set forth on its website. Applicants must agree to exercise best efforts to not lay off or to rehire already laid-off employees as soon as possible. Applications should be submitted through Premier Lender banks.
New Jersey Entrepreneurship Guarantee Program (investment amounts guaranteed by EDA)
For NJ-based entrepreneurial companies with fewer than 25 employees and generating under $5 million in annual revenues, this program provides guarantees of up to 80% of the total investor loan amount not to exceed $200,000 per entrepreneurial applicant, to incentivize private sector investors to provide working capital loans to the companies in which they hold equity interests. Participation is limited to the following industries: advanced manufacturing, information/technology, life sciences, finance and insurance, clean energy, food and beverage, advanced transportation, and film and digital media.
Emergency Loan Loss Reserve Fund (loan guarantees To CDFIs)
This fund is intended to facilitate the provision of loan guarantees, in a first loss position, for loans made by CDFIs for working capital to New Jersey-based micro and small businesses directly impacted by the COVID-19 outbreak after the Governor’s declaration of emergency. Each CDFI will have to comply with specific loan parameters in order to qualify for this program. These include (i) each applicant must certify that it has been adversely impacted by the emergency, i.e. closed, reduced hours, 20% reduction in revenue, 25% reduction in staff availability, material disruptions to its supply chain etc.; and (ii) no loan may exceed $75,000, with interest rates below 3.75% and a term not to exceed 5 years. Applications for assistance should be submitted to any one or more of the CDFIs: United Counties (Union County) Development Corp., Greater Newark Enterprises Corp., Regional Business Assistance Corp., New Jersey Community Loan Fund, and Cooperative Business Assistance Corp.
In addition, there are resources for technical assistance and support (including application assistance):
- from CDFIs for small-scale financing through them, as a result of emergency grant funding made available to CDFIs under the CDFI Emergency Assistance Grant Program, which should make cheaper financing options more easily accessible (through interest-buydown features of the program); and
- under the Emergency Technical Assistance Program, for application for financing from Small Business Administration or other state programs.