New Jersey’s Economic Development Authority has more than $41 million in state aid at various stages of deployment, funds meant as a lifeline to businesses struggling to generate revenue with the restrictions imposed to halt the spread of COVID-19. The amount could total about $100 million depending on what kinds of federal and philanthropic dollars come through to the state.
The first program, the EDA’s Small Business Emergency Grant Assistance Program, clocks in at $5 million. Just over an hour after applications went live in April, the program ran out of money. To date, the agency has paid out just over $3 million in grants to 892 businesses – out of the 942 employers that had been approved for a combined $3.2 million in grants.
All the grants awarded were between $1,000 and $5,000. They were paid to businesses such as liquor stores, cafes, car washes, salons, funeral homes, motels, clothing stores, gyms, dry-cleaners, delis, and sit-in restaurants.
“A recovery cannot start until adequate amounts of working capital are identified and made available,” Tom Bracken, president of the New Jersey Chamber of Commerce, said in a May 5 statement.
The EDA’s $10 million loan program ran out of funds about 30 minutes after applications opened in mid-April. More than 3,500 applicants are seeking a combined $250 million from the pot of money, according to EDA spokesperson Jake McNichol.
“We are in the process of reviewing and analyzing loan applications in order to distribute funds as quickly as possible,” he said in a statement to NJBIZ. “Due to the nature of the Loan Program, the review is more complex and will take longer to complete than for the Grant Program.”
The EDA, according to McNichol, needs to examine the applications in order to gauge whether businesses have the means to pay back the loans.
Those loans are capped at $100,000 a year for New Jersey businesses with up to $5 million in annual revenue. The repayment lasts 10 years, five of which are interest-free and the remainder of which entail rates capped at 3 percent. Payments can be deferred for the first 12 months.
Nonetheless, that “delay,” according to Assemblyman Brian Bergen, R-25th District, was a particular concern at a time when employers were already cash-strapped.
“Businesses aren’t going to be able to take advantage of them,” Bergen said at a remotely held Assembly Appropriations Committee hearing on May 4.
Still, Assemblyman John Burzichelli, D-3rd District, who chairs that committee, defended how the EDA has been handling the aid programs. “The amount of applications they received in both of those programs was simply huge,” he said.
“It’s not as if an effort isn’t being made, but if you consider the demand being made against the normal infrastructure … it’s not balanced because you can’t possibly be prepared for what we’re undertaking here.”
In mid-April, the Casino Reinvestment Development Authority approved a $2 million grant program which in coordination with the EDA will be awarded to Atlantic County and Atlantic City businesses. As of May 4, 274 small businesses had received a combined $899,000 out of the $1 million approved thus far for 316 applicants in and around the seaside resort town.
On April 17, the EDA announced that it picked six community lenders, known as community development financial institutions, that will contribute a combined $20 million to $30 million to struggling businesses, under a program known as the “CDFI Emergency Loan Loss Reserve Fund.” The agency will set aside $10 million to provide guarantees of up to 50 percent of the loan amount so that the banks are guaranteed at least half that amount if the recipients default.
The EDA picked New Jersey Community Capital, Regional Business Assistance Corporate, Cooperative Business Assistance Corp., UCEDC, the First Bergen Federal Credit Union and Greater Newark Enterprise Corp. to take part in the loan program.
Another form of state aid, the CDFI Emergency Assistance Grant Program, provides five grants of $250,000 to these banks so they can scale up operations to help with the flood of demand from business owners. Only the First Bergen Federal Credit Union was not chosen to receive one of the grants.
Elsewhere, on April 24, global investment giant Goldman Sachs and lender Pursuit said they were making $10 million available to small businesses. The funds will be disbursed as loans through the Paycheck Protection Program, a federal COVID-19 relief effort that totals more than $600 billion. The loans are forgiven if the recipients use the money to keep workers on the payroll for eight weeks.
As of May 4, there were 314 applications for loans, of which $7.2 million was approved or awarded to 116 businesses, according to Laura Kozien, Pursuit’s marketing director.