Small Business

By: Jeffrey Hall

As with other government agencies, the New Jersey Economic Development Authority (“EDA”) has unveiled an emergency program to deal with the COVID-19 crisis that has beset New Jersey’s small businesses.  While this program will be useful, it will be on a first come, first serve basis and will not be funded to the level to meet the actual need.  As we learned from a leading New Jersey business leader, the program will draw on existing EDA funds and not, currently, be funded further by the State of New Jersey.  That, of course, may change.

The program is called the Small Business Emergency Assistance Loan Program (“Program”).  $10,000,000 has been allocated to direct low-cost financing to New Jersey small businesses and non-profits.  The Program is designed to cover operating expenses and insure that functions of the business can continue while the pandemic lasts.

A small business or non-profit (“Business”) may request a direct loan of up to $100,000 based on need.  The Business must have been in existence for at least one year and have less than $5,000,000 in annual revenue.  The Business must be enduring negative impacts from the COVID-19 pandemic.  Examples would be reduction of business hours, complete closure, a minimum of a 20% decline in revenue, employees furloughed or laid-off, government-imposed closure, to name a few.

There are numerous factors regarding eligibility:

  • A physical location in the State of New Jersey (not home-based);
  • Have been in operation for at least one year;
  • Have less than $5,000,000 in annual revenue;
  • Demonstrate a global debt service coverage ratio of 1.00 as of the end of last year;
  • Ability to demonstrate negative impact on or after March 9th;
  • Must be registered to do business in the State of New Jersey;
  • Be in good standing with the Department of Labor and Workforce Development;
  • Provide a CEO certification that the business will use best efforts to not lay-off employees or will re-hire employees as soon as possible; and finally
  • Non-profits must have 501(c)(3), 501(c)(4) or 501(c)(7) status.

Several businesses are ineligible for this Program.  Please consult the EDA website for a list of those businesses.

Because this is an emergency program, there will be liberal financial terms with these loans including: a ten-year term, 0% interest rate for the first five years with prevailing rate for the next five years capped at 3%, and deferred repayments for twelve months.  There will be no fees charged, including application fees, and the application process will start the week of March 30th.

For more information, consult the EDA website. Over the weekend, the New Jersey Business & Industry Association announced a special webinar featuring Tim Sullivan, the CEO for the New Jersey Economic Development Authority (NJEDA).  Mr. Sullivan will discuss the recently announced NJEDA programs to assist New Jersey businesses (see our blog, insert blog link).  The “conversation” with Mr. Sullivan will be at 4:00pm on March 31.  You can register by clicking here.

For additional COVID-19 related resources and articles visit our COVID-19 Resource Center.

The foregoing is intended for general information purposes and is no substitute for specific legal advice.