Governor Phil Murphy described these new programs as a critical step in the effort to mitigate the economic impacts and challenges faced by workers and businesses.
New Jersey has introduced its most recent initiative to combat the economic consequences of the COVID-19 crisis. The new programs, approved by the New Jersey Economic Development Authority (NJEDA), provide financial assistance to small, mid-size and entrepreneurial businesses. These initiatives include grants for small businesses, zero-interest loan programs for mid-size companies, financial assistance for entrepreneurs, support for private-sector lenders and community development financial institutions (CDFIs) and implement technical support and marketplace resources. Governor Phil Murphy described these new programs as a critical step in the effort to mitigate the economic impacts and challenges faced by workers and businesses in order to come out of the COVID-19 crisis stronger than before.
The March 26 initiatives were implemented with a focus on local small, mid-size and new businesses. These businesses may have had to close or alter their operations due to the pandemic, and many were still in the process of starting up when the pandemic spread. These initiatives include, among others, (1) $5,000 grants for eligible small businesses, (2) working capital loans of up to $100,000 with a 10-year repayment term (first five years interest-free) for eligible businesses with less than $5 million in revenues, and (3) technical assistance to New Jersey-based companies applying for assistance through the U.S. Small Business Administration’s existing and upcoming CARES Act programs. The NJEDA targets the applications to be open on March 30. According to the NJEDA, applications will be considered on a first-come, first-serve rolling basis.
A more comprehensive list of these new NJEDA initiatives is listed below.
NJEDA Economic Assistance for Business Initiatives
Small Business Emergency Assistance Grant Program
- Provides up to $5,000 for small business involved in certain industries including: retail, arts, entertainment, recreation, accommodation, food service and services involving repair, maintenance, personal care and laundry.
- Eligible businesses include those having between one and 10 full time equivalent employees (amount of grant based on number of employees), with a physical commercial location in New Jersey, that are classified as one of the those industries listed above and are able to provide additional documentation to show good standing in New Jersey.
- The CEO of the business must also make certifications on behalf of the business to the NJEDA.
Small Business Emergency Assistance Loan Program
- Provides working capital loans up to $100,000 to business with less than $5 million in revenue. The loan will have a 10-year term at an interest rate of zero percent for the first five years and then will reset to the NJEDA’s prevailing floor rate for the remaining five years. The NJEDA floor rate will be capped at 3 percent.
- Eligible small businesses must have a physical commercial location in New Jersey, have been in existence for at least one year, have less than $5 million in annual revenue, had a global debt service coverage ratio of at least 1.00 as of December 2019, are able to demonstrate negative impacts related to COVID-19, and are able to provide additional documentation to show good standing in New Jersey.
Community Development Finance Institution (CDFI) Emergency Loan Loss Reserve Fund
- Provides a $10 million capital reserve fund for taking a first loss position on these loans providing low interest working capital to microbusinesses, which allows the CDFIs to combat loan defaults from COVID-19. This will then allow the CDFI to provide more loans at lower interest rates to these affected microbusinesses.
- Eligible CDFIs must comply with specific parameters pursuant to this program including:
- Making loans to a company that is adversely impacted by the COVID-19 emergency;
- Efforts are to be focused on micro or small business;
- Loans cannot exceed $75,000;
- Interest rates capped at 3.75 percent;
- Loans must have flexible structures; and
- Loan terms cannot exceed five years.
CDFI Emergency Assistance Grant Program
- Provides up to $250,000 to CDFIs to reduce interest rates or scale operations during the pandemic.
- Designed to support origination, technical support and underwriting capacity of the CDFIs, which also includes hiring employees. This program will also assist impacted businesses with lower costs and flexible financing.
New Jersey Entrepreneur Support Program
- Provides 80 percent loan guarantees for working capital loans to New Jersey entrepreneurs. This loan will not exceed $200,000 per company.
- Eligible entrepreneurial businesses must have a minimum of 50 percent New Jersey employees, less than 25 total employees at time of application, under $5 million in revenues, corporate headquarters in New Jersey, must be defined as one of the eight sectors in Governor Murphy’s economic development plan and provide additional documentation to show good standing in New Jersey.
Small Business Emergency Assistance Guarantee Program
- Provides 50 percent guarantees on working capital loans and waives fees on loans made through institutions participating in the NJEDA’s Premier Lender or Premier CDFI programs for business impacts including, but not limited to, reduced revenue, employee shortage or supply chain impacts. The loans will not exceed $100,000 to premier lenders.
- Eligible business must have a physical commercial location in New Jersey, have been in existence for at least one full year, have $5 million or less in annual revenue, must demonstrate COVID-19’s negative impacts on the business and provide additional documentation to show good standing in New Jersey.
Emergency Technical Assistance Program
- Provides technical assistance to New Jersey-based companies applying for assistance through the U.S. Small Business Administration. Engages technical assistance organizations to help New Jersey-based companies applying for assistance through the U.S. Small Business Administration.
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Duane Morris has created a COVID-19 Strategy Team to help organize, plan, respond to and address this fast moving situation. Contract your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.
For More Information
If you have any questions about this Alert, or for more detailed information about any of these newly approved programs or assistance in determining whether your business is eligible for assistance, please contact Paul P. Josephson, Michael R. Barz, Brad A. Molotsky, any member of our COVID-19 Strategy Team or the attorney in the firm with whom you are in regular contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.