Hurricane Sandy Disaster Relief Through the New Jersey Main Street Business Assistance Program
Program Overview and Q&A
Given the disastrous effects of Hurricane Sandy on many businesses in New Jersey, the Christie Administration is taking immediate steps to provide enhanced benefits to impacted businesses.
The Main Street Disaster Relief Program will make available EDA guarantees of up to $500,000 for commercial lines of credit to businesses that need access to cash to improve their damaged property while awaiting insurance proceeds.
The EDA’s Premier Lender banking partners will be able to extend either a new credit line, a carve out provision to an existing credit line, or an increase to an existing credit line of which the new proceeds will be used to fund damage repair costs.
The program is designed to offer an expedited approval, and a decision will be made within five business days from the time a complete underwriting package is received. A commitment letter is issued within two business days after approval.
Q: What are the timeframes associated with this temporary assistance?
A: The temporary program will end on December 31, 2012. The CEO has the discretion to extend the deadline beyond December 31, 2012 to address business demand as necessary.
Q: What are the eligibility requirements for this temporary program enhancement?
A: Current eligibility and terms for the EDA line of credit guarantee is as follows, and will remain for this enhancement:
- Maximum Loan to Value of 100%
- Global Debt Service Coverage Ratio of 1.10x.
- EDA collateral position is pari-passu with the bank.
- Start-up companies (less than two years of operations) are not eligible.
- Minimum credit score of at least 680 for one of the guarantors.
- Applicants (which include businesses and not-for-profits) must be in good standing with the Premier Lender.
- All fees (application, commitment, guarantee, and tax clearance) will be waived.
New eligibility requirements and terms:
- As noted above, Loan to value will also remain limited to 100% and may include a blanket lien on all business assets. However, collateral under this provision must include the bank being named as "lender loss payee" on the insurance policy to which the applicant is making a claim. The maximum loan to value of 100% will include the limits within the insurance policy that covers the specific claim. The limits within the insurance policy must be equal to the amount of the line earmarked to cover damage costs.
- The initial term of the guarantee offered to Lending Partners will be up to 12 months. Delegated authority is requested to provide extensions beyond the initial term with an aggregate guarantee period not to exceed 24 months. Such extensions will be granted on a case by case basis at the sole discretion of the EDA. The actual term of the guarantee will be the lesser of the guarantee option chosen (plus extensions if applicable) or the date on which the insurance proceeds have been received by the Lending Partner and the line advances associated with damage repairs have been repaid.
Q: Is this benefit open to only existing bank customers, or can new customers apply for assistance?
A: This temporary program enhancement will be open to existing and to new customers.
Q: Who is responsible for evidencing the damage to the business?
A: The applicant is required to provide evidence to the bank that an insurance policy to cover damage costs was in place at the time of the damage. Evidence should also include the value of the insurance coverage limitations. The bank would be expected to survey and review the damage to the business.
Q: What actions must the bank take in order to ensure the insurance proceeds are disbursed appropriately as part of the transaction?
A: The bank must be listed as “lender loss payee” on the insurance policy. The bank will notify the EDA when the insurance proceeds have been received and the credit line used to finance the damage costs has been paid to a zero balance. At this point, the EDA’s guarantee would be terminated.
Q: Are EDA’s Premier Lenders required to partake in this program?
A: EDA is offering this value add opportunity to our Premier Lenders as they work to assist their Hurricane Sandy-impacted customers. Although Premier Lenders are not required to utilize this program offering, we would encourage them to work with us to provide access to credit to the businesses and not-for-profits in New Jersey that require immediate access to credit as they await insurance proceeds following this natural disaster.