As demand for state and federal aid programs vastly outstrips the funds available for businesses that have been ordered to shutter their doors, the New Jersey Economic Development Authority is moving ahead with its third aid program from a $41 million pot of money meant to support certain businesses that are taking an economic hit amid the COVID-19 pandemic.
EDA officials said they picked six community lenders, known as community development financial institutions, that would contribute a combined $20 million to $30 million to struggling businesses that have seen their commerce plummet during the pandemic under the “CDFI Emergency Loan Loss Reserve Fund.”
The agency would 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 companies default on their borrowing.
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.
Businesses will apply directly to the CDFI’s, each of which will develop its own timeline and eligibility requirements.
Each program is geared toward small businesses and micro-sized companies, which often have up to 10 employees.
“While all small businesses are suffering, minority-led microbusinesses that often cannot access traditional bank financing are having a particularly difficult time weathering the COVID-19 outbreak,” GNEC Executive Director Steven Gomez said in the EDA statement. “During this time, CDFIs are a vital lifeline for these business owners.”
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.
“Northern New Jersey was hit early and hard by the coronavirus outbreak, and we recognize the long road to recovery our small business customers are facing,” Robert Moore, the credit union’s chief executive officer, said in the EDA’s Friday statement. “Never has it been more important for us to empower and strengthen our local businesses.”
The details of these two latest programs come a day after the EDA began turning away new applicants for a $10 million loan program, after receiving 3,260 applications seeking a combined $228.7 million.
The EDA hit the $10 million mark less than half an hour after applications opened at 9 a.m. this past Monday. A $5 million grant program the week before ran out of money just over an hour after applications opened.
“We need another big slug of help from the federal government,” Gov. Phil Murphy said during a media appearance with NorthJersey.com Friday morning. “There’s no replacing the federal government – that means small businesses, hospitals and explicitly direct cash assistance for states.”
On Thursday, the U.S. Small Business Administration said it was closing off applications for its $349 billion Payment Protection Program after more than one million nationwide applicants sought the entire combined allotment.
The Economic Injury Disaster Loan Program, which is run in coordination with private financial institutions, also closed its applications Thursday.
“The SBA has processed more than 14 years’ worth of loans in less than 14 days,” reads a joint statement issued Thursday from U.S. Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza.
Those two weeks have been marred by delays and headaches, according to accounts from many business owners.
“The rollout has been a disaster. A lot of the agencies – SBA, Treasury, [Internal Revenue Service], has been rolling out in such a piecemeal fashion that the lenders haven’t been able to have a scope of this at all,” U.S. Rep. Andy Kim, D-3rd District, said in a press call Thursday with the state’s House Democrats.