Additional Financial Resources Available to Businesses – New Jersey

March 30, 2020

In addition to the financial resources available through the Coronavirus Aid, Relief, and Economic Security Act (“CARES”), there are several additional initiatives available to combat the economic hardship suffered by small and mid-sized businesses in New Jersey. New Jersey’s Economic Development Authority (“NJEDA”) has launched several initiatives, outlined below.

Applications for the programs are anticipated to be open during the week of March 30, 2020, and can be accessed here: https://www.njeda.com/Press-Room/News-Articles/Press-Releases/NJEDA-Announces-New-Initiatives-to-Support-Busines.

Loans

The Small Business Emergency Assistance Loan Program

The Small Business Emergency Assistance Loan Program provides small businesses and nonprofits with working capital loans of up to $100,000 to cover operating expenses and to ensure continuity of operations during COVID-19. The Program offers a 10-year term and amortization, 0% interest for the first five years and NJEDA’s prevailing interest rate floor capped at 3% from year 6 to year 10, as well as deferred payments for the first 12 months of the loan.

Eligible businesses must: (a) have a physical commercial location in New Jersey; (b) have been in existence for at least one year; (c) have less than $5 million in annual revenue; (d) show a global debt service coverage ratio of 1.00 (as of December 31st, 2019); (e) be able to demonstrate negative impact related to COVID-19 on or after March 9, 2020; (f) be registered to do business in New Jersey; (g) certify that the company is in good tax standing with New Jersey and the Department of Labor and Workforce Development; and (h) provide a CEO certification that the company will make its best-effort to not lay off employees or will re-hire employees as soon as possible.

Small Business Emergency Assistance Guarantee Program

The Small Business Emergency Assistance Program is a $10 million program that provides a 50% guarantee, capped at $100,000, to Premier Lenders that will issue working capital loans or lines of credit to support business impacted by COVID-19.

Eligible businesses must: (a) have a physical commercial location in New Jersey; (b) have been in existence for at least one year; (c) have less than $5 million in annual revenue; (d) show a global debt service coverage ratio of 1.00 (as of December 31st, 2019); (e) be able to demonstrate negative impact related to COVID-19 on or after March 9, 2020; (f) be registered to do business in New Jersey; (g) certify that the company is in good tax standing with New Jersey and the Department of Labor and Workforce Development; and (h) provide a CEO certification that the company will make its best-effort to not lay off employees or will re-hire employees as soon as possible.

The following is a list of Premier Lender Banks:
BB&T · Bank of America · Columbia Bank · ConnectOne Bank · Cross River Bank · Fulton Bank of New Jersey · Investors Bank · JPMorgan Chase · Lakeland Bank · M&T Bank · Newfield National Bank · OceanFirst Bank · Peapack-Gladstone Bank · PNC · Republic Bank · Santander Bank · Sterling National Bank · TD Bank · The Bank of Princeton · Provident Bank · TriState Capital Bank · Valley National Bank · Wells Fargo.

New Jersey Entrepreneurship Guarantee Program

The New Jersey Entrepreneurship Guarantee Program is a $5 million program that encourages private sector investors to provide additional working capital loans to eligible businesses, impacted by COVID-19, in which the investor is already an equity holder, by guaranteeing up to 80% of the total investment amount, not to exceed $200,000 per company. In short, 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 the March 9, 2020 declaration of state of emergency, and the program will be retroactive to that date. Eligible entrepreneurial businesses must: (a) have a minimum of 50% of their employees in New Jersey; (b) have less than 25 total employees at the time of application; (c) have under $5 million in revenues; (d) have corporate headquarters in New Jersey; (e) fall under one of the following sectors: advanced manufacturing, information/technology, life sciences, finance and insurance, clean energy, food and beverage, advanced transportation, food and beverage, film and digital media; (f) be registered to do business in New Jersey; and (g) certify that the company is in good tax standing with New Jersey and the Department of Labor and Workforce Development.

Community Development Finance Institution Emergency (“CDFI”) Loan Loss Reserve Fund

All CDFIs are certified by the Community Development Financial Institutions Fund at the U.S. Dependent of Treasury, for the purpose of providing credit and financial services to underserved markets and populations. The CDFI Emergency Loan Loss Reserve Fund is a $10 million capital reserve fund that provides loan guarantees to CDFIs for the issuance of low-interest working capital loans to businesses impacted by COVID-19. The program is intended to enable CDFIs 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 including the following: (a) loans offered must be made to a company that certifies it has been adversely impacted by the emergency; (b) loans must be focused on working capital needs of a micro or small business; (c) each loan cannot exceed $75,000; (d) interest rates on all loans must be lower than 3.75%; (e) the CDFI loans must provide flexible loan structures (e.g. deferred payments, moratoriums or interest only for up to 6 months); and (f) the loans cannot exceed a term of five years.

Small Businesses and micro enterprises, some of which may not be able to secure traditional bank financing should reach out to their local CDFI for financing options, which can be found here: https://www.njeda.com/small_midsize_business/services.

Grants

The Small Business Emergency Assistance Grant Program

The Small Business Emergency Assistance Loan Program provides eligible small businesses and nonprofits with up to $5,000 in funding to help the businesses support and maintain a workforce during the COVID-19 containment period.

Eligible businesses must: (a) have between 1-10 full time employees; (b) be physically located in New Jersey; (c) be classified as retail, accommodation & food services, arts, entertainment and recreation, among other industries; (d) be registered to do business in New Jersey; (e) certify that the company is in good tax standing with New Jersey and the Department of Labor and Workforce Development; and (f) certify that the business has been negatively impacted by COVID-19 and will make its best efforts not furlough or lay off employees from the time of application to six months after the end of the declared state of emergency.

The Community Development Finance Institution Emergency Assistance Grant Program

The CDFI Emergency Assistance Grant Program is a $1.25 million fund that will offer CDFIs up to $250,000 to enable them to: (a) support the scale-up of the origination, technical support, and the underwriting capacity of CDFIs, including hiring staff; and (b) allow CDFIs to buy down interest rates on any COVID-19 related emergency working capital loan, thereby providing impacted businesses with lower-costs and more flexible financing.

Other Programs

Emergency Technical Assistance Program

The Emergency Technical Assistance Program is a $150,000 program that will support technical assistance to New Jersey-based companies applying for U.S. Small Business Administration or State programs. Contracted organizations will provide application assistance to businesses including, but not limited to, preparing financial information, packaging application documentation, completing and submitting the on-line or paper-based application. Further information regarding the program’s eligibility requirements is not yet available.


For more information on this or other matters, please contact:

Shivani Poddar at +1 212 592-1446 or [email protected]
Maame Esi Austin at +1 212 592-1591 or [email protected]

© 2020 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.