Notice of Funding Availability: Small Business Emergency Assistance Loan Program
New Jersey Economic Development Authority (NJEDA)
Small Business Emergency Assistance Loan Program
On March 9, 2020, Governor Phil Murphy issued Executive Order 103, declaring a State of Emergency and a Public Health Emergency to ramp up New Jersey’s efforts to contain the spread of COVID-19. Subsequent containment measures were announced and are continuing to be announced, including restrictions on public gatherings and limited operating hours for non-essential businesses. While these measures are consistent with similar measures being taken nationally that are expected to limit the public’s exposure to COVID-19, there is already and will continue to be an adverse economic impact on our nation’s economy.
Within New Jersey, small businesses, and residents employed by these businesses, are facing economic challenges as businesses have difficulties meeting payroll obligations and supporting basic operating expenses that are expected to increase during a prolonged period of restricted operation or closing. Without a source of immediate relief, small businesses are being forced to furlough or lay off employees. Accordingly, the State of New Jersey is taking early action on a set of economic stability measures to provide short-term cash flow support to small businesses and increase overall business confidence, with the following objectives:
- Get funding into the market as soon as possible;
- Where possible, adjust existing NJEDA programs to address crisis needs;
- Utilize multiple channels/partners to maximize marketing of programs and minimize processing capacity constraints;
- Leverage private, federal, and philanthropic capital where possible to scale impact; and
- Provide a suite of compatible offerings to help address varied marketplace needs (e.g., grants, no-cost loans, low-cost loans, loans through intermediaries, technical assistance).
The Small Business Emergency Assistance Loan Program provides low-cost financing available to cover operating expenses and ensure continuity of operation for New Jersey small businesses and non-profit organizations that have been impacted by COVID-19.
Under the Small Business Emergency Assistance Loan Program, small businesses and non-profit organizations in existence for at least one year before the date of application having less than $5 million in annual revenue and a physical commercial location (not including home business locations) in New Jersey may be eligible for a direct loan of up to $100,000.
In recognition of the purpose of the financing and recognizing that entities facing economic challenges can only benefit from financing that is low-cost and has flexible terms, the NJEDA has structured these loans with a 10-year term and amortization, with the first five years at a fixed interest rate of 0 percent, and the remaining five years at the Authority’s prevailing interest rate floor (capped at 3.00 percent), with deferred repayments for 12 months, and an additional 6 months of deferral, if needed. The NJEDA’s interest rate floor is fixed, only changed by the EDA per a policy decision, and not based on prevailing market conditions similar to a US Treasury rate.
An eligible entity must be able to show a global debt service coverage ratio of 1.00 in the fiscal year prior to the Governor’s issuance of Executive Order 103 on March 9, 2020. Financial statements provided may be CPA prepared, management prepared, or filed copies of business tax returns.
For guarantors, unlimited personal guarantees of individuals having a 10 percent or more ownership in for-profit applicants and related entities will be required. Personal guarantees will not be applicable for non-profit organizations. Consistent with the approach that is being taken by the federal Small Business Administration in its emergency loans, the EDA will require the borrower to pledge all available collateral for the loan which may include real estate if available. No loans will be declined for a lack of collateral.
The financing available under the Small Business Emergency Assistance Loan Program may be used as working capital to support business continuity for a range of COVID-19 related impacts to businesses (reduced revenue, employee shortage, supply chain impact, etc.)
In order to be eligible, entities shall be small businesses and non-profit organizations in existence for at least one year before the date of application having less than $5 million in annual revenue and a physical commercial location (not including home business locations) in New Jersey.
The eligible entity must have a physical commercial location in the State of New Jersey (e.g., an office, a physical point of sales, a warehouse, manufacturing facility, etc.). Home-based businesses are not eligible for this program; however, non-profit organizations are eligible.
The CEO/equivalent officer of the applying entity must self-certify that the firm:
- 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 (entities 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 immediate repayment of the outstanding amount of the loan; and
- Has been negatively impacted by the COVID-19 declared state of emergency on or after March 9, 2020 (e.g., has been temporarily shut down, has been required to reduce hours, has had at least a 20 percent 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).
In addition, the applying entity must be registered to do business in the State of New Jersey; have an up-to-date Tax Clearance Certificate from the New Jersey Department of Treasury at time of approval; and must be in good standing with the New Jersey Department of Labor and Workforce Development.
Prohibited businesses include, but are not limited to: gambling or gaming activities; the conduct or purveyance of “adult” (i.e., pornographic, lewd, prurient, obscene or otherwise similarly disreputable) activities, services, products or materials (including nude or semi-nude performances or the sale of sexual aids or devices); any auction or bankruptcy or fire or “lost-our-lease” or “going-out-of-business” or similar sale; sales by transient merchants, Christmas tree sales or other outdoor storage; any activity constituting a nuisance; or any illegal purposes.
Applications will be accepted until all funding is exhausted or through the end of the declared emergency and public health emergency.
Due to financial hardship, there will be no fees associated with the Small Business Emergency Assistance Loan Program for the first five years of a loan, including application fees, and then standard modification fees will apply.
Additional information on the Small Business Emergency Assistance Loan Program may be found at https://faq.business.nj.gov/en/collections/2198378-information-for-nj-businesses-on-the-coronavirus-outbreak.