New Jersey Small Business Economic Development Authority – Small Business Assistance re: COVID-19

The New Jersey Economic Development Authority (NJEDA) has approved a series of aid packages for small/mid-size businesses in the amount of $75 million, which could grow to $100 million depending on matching grants.

The NJEDA programs focus on businesses that have been hit the hardest by COVID-19. The initiatives include a grant program for small businesses, a zero-interest loan program for mid-size companies, support for private-sector lenders and a variety of resources providing technical support.

The NJEDA hopes the initiatives will provide relief to 3,000 and 5,000 small and mid-size businesses in the State. Some of these NJEDA programs will begin accepting applications as early as March 30^th. Below you will find each of the NJEDA’s programs, a summary of each program and eligibility requirements.

Small Business Emergency Assistance Grant Program

A $5 million program that will provide grants up to $5,000 to small businesses in retail, arts, entertainment, recreation, accommodation, food service and other services — such as repair, maintenance, personal and laundry services — and nonprofits to stabilize their operations and reduce the need for layoffs or furloughs. The focus of this round of funding is on the smallest enterprises in industries that are among the most adversely impacted by the COVID-19 containment measures.

• The Small Business Emergency Assistance Grant Program will be provided to small businesses that have between 1–10 full time equivalent employees (“FTE”). The grant funding is targeted as unrestricted payroll and working capital support, and cannot be used for any capital expenses, including construction.
• Grant values are calculated at $1,000 per FTEs reported on business’ WR-30 filed with the New Jersey Department of Labor and Workforce Development.
  • Minimum grant amount (per application): $1,000
  • Maximum grant amount (per application): $5,000
• Total available funding of up to $5 million of which $3 million of the program funds will be set aside for small businesses with 5 or fewer FTEs.
  • Eligible businesses for the Small Business Emergency Assistance Loan:
    • Have between 1 and 10 FTEs. This means non-employee companies (holding), companies that have between 1-10 FTE utilizing 1099 employees, and larger firms are not eligible for this round of grant funding;
    • Have a physical commercial location in the State of New Jersey. Home-based businesses are not eligible for this round of grant funding;
    • Are classified in one of the following industries: Retail (NAICS codes starting with 42 or 43); Accommodation & food services (NAICS codes starting with 72); Arts, entertainment & recreation (NAICS codes starting with 71); Other services (only those with NAICS codes starting with 811 and 812);
    • Are registered to do business in the State of New Jersey;
    • Must certify that the company is in good tax standing with the State;
    • Are in good standing with the Department of Labor and Workforce Development, with all decisions of good standing at the discretion of the Commissioner of the Department of Labor and Workforce Development.
    • The CEO of the business must certify that the business:
      • Will make a best effort not to furlough or lay off any individuals from the time of application through six months after the end of the declared state of emergency. (Small businesses that have already furloughed or laid off workers must make a best-effort pledge to re-hire those workers as soon as possible.) Any material breach of its best efforts certification may result in the NJEDA seeking repayment of the grant.
      • Has been negatively impacted by the COVID-19 declared state of emergency in Executive Order 103 (e.g., has been temporarily shut down, has been required to reduce hours, has had at least a 20% drop in revenue, has been materially impacted by employees who cannot work due to the outbreak, or has a supply chain that has materially been disrupted and therefore slowed firm-level production).
      • Has a material financial need that cannot be overcome without the grant of emergency relief funds at this time (e.g., does not have significant cash reserves that can support the small business during this period of economic disruption.
• Non-profit organizations are eligible for this program. Eligible non-profits must have status of 501(c)(3), 501(c)(4), 501(c)(7).
• The following businesses are not qualified (“Non-Eligible Businesses”):
  • Related to gambling or gaming activities
  • Related to the purveyance of “adult” (i.e., pornographic, lewd, prurient, obscene) activities, services, products or materials (including nude or semi-nude performances or the sale of sexual aids or devices)
  • Auction or bankruptcy or fire or “lost-our-lease” or “going-out-of-business” or similar sale.
  • Traveling merchants.
  • Christmas tree sales or other outdoor storage.
  • Any other activity constituting a nuisance.
  • Illegal under the laws of the State of New Jersey
• Applications are anticipated to be opened on the week of March 30th. Completed applications will be considered on a first come, first serve rolling basis.

Small Business Emergency Assistance Loan Program

A $10 million program that will provide working capital loans of up to $100,000 to businesses with less than $5 million in revenues. Loans made through the program will have 10-year terms with zero percent for the first five years, then resetting to the EDA’s prevailing floor rate (capped at 3%) for the remaining five years.

• The program provides a 50% guarantee, not to exceed a total NJEDA exposure of $100,000 to Premier Lenders that will issue working capital loans or lines of credit to support business continuity for a range of COVID-19 related impacts to businesses (reduced revenue, employee shortage, supply chain impact, etc.) There are no NJEDA fees associated with applying for this program.
• Eligible businesses:
  • Have a physical commercial location in the State of New Jersey. Home-based businesses are not eligible for this round of grant funding;
  • Have been in existence for at least one full year ;
  • Have $5 million or less in annual revenue;
  • Can demonstrate a negative impact on business due to the COVID-19 outbreak;
  • Can provide CEO certification that you are making a best-effort to not lay off employees or will re-hire employees as soon as possible;
  • Are registered to do business in NJ and must certify that the company is in good tax standing with the State;
  • Are in good standing with the New Jersey Department of Labor and Workforce Development.
  • Businesses that do not qualify à Non-Eligible Businesses (see above)

Community Development Finance Institution (CDFI)

All CDFIs are certified by the Community Development Financial Institutions Fund at the U.S. Department of Treasury for the purpose of providing credit and financial services to underserved markets and populations. NJEDA has created two programs, the CDFI Emergency Assistance Grant Program and the CDFI Loan Loss Reserve Fund to help local CDFI’s scale their lending to micro and small businesses, especially in communities and business segments that are traditionally underserved.

• CDFI Emergency Assistance Grant Program: A $1.25 million program that will provide grants of up to $250,000 to CDFIs to scale operations or reduce interest rates for the duration of the outbreak.
• CDFI Emergency Loan Loss Reserve Fund: A $10 million capital reserve fund to take a first loss position on CDFI loans that provide low-interest working capital to microbusinesses. This will allow CDFIs to withstand loan defaults due to the outbreak, which will allow them to provide more loans at lower interest rates to microbusinesses affected by the outbreak.
  • Each CDFI will have to comply with specific loan program parameters to fit into this program:
    • Made to a company that certifies it has been adversely impacted by the emergency (e.g., closed, reduced hours, 20% reduction in revenue, 25% reduction in staff availability, material disruptions to its supply chain)
    • Focused on working capital needs of a micro or small business
    • Each loan cannot exceed $75,000
    • Interest rates on all loans must be lower than 3.75%
    • Their loans must provide flexible loan structures (e.g. deferred payments, moratoriums or interest only for up to 6 months)
    • Their loans cannot exceed a term of five years
  • A CDFI may receive a grant under this program and also participate in CDFI Loan Loss Reserve Fund and the Small Business Emergency Assistance Guarantee Program (although those programs cannot be used for the same loan).
  • The following types of businesses are not eligible à Non-Eligible Businesses (see above)
  • List of Community Development Finance Institutions (CDFIs)
    • UCEDC – United Counties (Union County) Development Corp.
    • GNEC – Greater Newark Enterprises Corp.
    • RBAC – Regional Business Assistance Corp.
    • NJCLF – New Jersey Community Loan Fund
    • CBAC – Cooperative Business Assistance Corp.

NJ Entrepreneur Support Program

A $5 million program that will encourage investment by encouraging private sector investors to provide additional working capital loans to NJ-based entrepreneurial businesses in which the investor is already an equity holder and temporarily support a shaky market by providing 80% loan guarantees for working capital loans to entrepreneurs and cannot exceed $200,000 per NJ entrepreneurial company.

• The program provides a guarantee of an investor loan advanced for working capital to an entrepreneurial company that has been impacted by COVID-19. The investment must have been made after the date of emergency (March 9, 2020, as per the Governor’s Executive Order 103). This program will be retroactive to that date.
• The entrepreneurial business must:
  • Have a minimum of 50% of employees in NJ
  • Have less than 25 total employees at the time of application
  • Have under $5 million in revenues
  • Have corporate headquarters in New Jersey (including at least one C suite member with a principal office in New Jersey)
  • Fall under one of the eight sectors outlined in Governor Murphy’s economic plan (advanced manufacturing, information/technology, life sciences, finance and insurance, clean energy, food and beverage, advanced transportation, food and beverage, film and digital media)
  • Be registered to do business in NJ and must certify that the company is in good tax standing with the State
  • Be in good standing with the Department of Labor and Workforce Development
• Investor Eligibility:
  • Investors can include, but are not limited to, individuals, trusts, and corporations
  • Investors must already have equity interest and equity position in the company
  • Qualified investors are not required to be New Jersey residents
• Applications will be accepted in the coming weeks. Completed applications will be considered on a first come, first serve rolling basis.

Moratorium/Loan Fee Forgiveness

NJEDA has approved a 3-month payment moratorium for eligible businesses on direct loans and premier lender participation loans (pending approval by agency bank). NJEDA is also allowing collateral releases, subordinations and substitutions on business assets for businesses impacted by COVID-19, and waiving late fees on loan repayments and loan modification fees for impacted businesses.

• Businesses are eligible if:
  • Are able to demonstrate negative impact related to COVID-19 on or after March 9th, 2020
  • Are not in active litigation with NJEDA
  • Have not been delinquent on existing loan for 120 days

Emergency Technical Assistance Program

A $150,000 program that will support technical assistance to New Jersey-based companies applying for assistance through the U.S. Small Business Administration. The organizations contracted will be paid based on SBA application submissions supported by the technical assistance they provide.

Economic Injury Disaster Loans

All NJ counties are now approved for federal disaster assistance. These are working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. These loans are intended to assist through the disaster recovery period.

• To be eligible for EIDL assistance, New Jersey-based small businesses or private non-profit organizations must have sustained economic injury, as well as being located in a disaster-declared county or contiguous county, which all New Jersey counties currently are.
• Credit Requirements
  • Credit History – Applicants must have a credit history acceptable to SBA.
  • Repayment – Applicants must show the ability to repay the loan.
  • Collateral – Collateral is required for all EIDL loans over $25,000. SBA takes real estate as collateral when it is available.
  • SBA will not decline a loan for lack of collateral, but SBA will require the borrower to pledge collateral that is available.
• Interest Rates – The interest rate is determined by formulas set by law and is fixed for the life of the loan. The maximum interest rate for this program is 3.750 percent.
• Loan Terms – The law authorizes loan terms up to a maximum of 30 years. SBA will determine an appropriate installment payment based on the financial condition of each borrower, which in turn will determine the loan term.
• Loan Amount – The law limits EIDLs to $2,000,000 for alleviating economic injury caused by the disaster. The actual amount of each loan is limited to the economic injury determined by SBA, less business interruption insurance and other recoveries up to the administrative lending limit. SBA also considers potential contributions that are available from the business and/or its owner(s) or affiliates.