NJEDA Offers $ 75 Million to Small Businesses Affected by Coronavirus, Mostly Loans

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The agency says its resources could affect 3,000 to 5,000 small businesses affected by COVID-19. But without federal subsidies, small business owners could take on more debt.

By Matt Skoufalos | March 26, 2020

On the same day New Jersey received a federal declaration of disaster to support its statewide fight against the novel coronavirus (COVID-19), the New Jersey Economic Development Authority (NJEDA) also released $ 75 million. in small business assistance dollars.

New initiatives include:

  • a $ 5 million Small Business Emergency Assistance Grant program, which will provide up to $ 5,000 to small businesses in “retail, art, entertainment, recreation, business, etc. services. accommodation, catering and others – such as repair, maintenance, personal and laundry services – to stabilize their operations and reduce the need for layoffs or time off. Only companies with at least one employee are eligible.
  • a $ 10 million small business emergency loan program, providing working capital loans of up to $ 100,000 to businesses with revenues of less than $ 5 million. The program offers repayments over 10 years, with 0% interest for the first five years, then a floor rate in effect (capped at 3%) for the following five years.
  • a $ 10 million Community Development Finance Institution (CDFI) emergency loan loss reserve fund to provide low-interest working capital to microenterprises and to withstand bad credit payday loans defaults. payments related to COVID-19.
  • $ 1.25 million in the CDFI Emergency Assistance Grants program, providing up to $ 250,000 for CDFIs to scale up operations or reduce interest rates during the outbreak.
  • $ 5 million in “entrepreneur support” to secure 80% of working capital loans for entrepreneurs.
  • a $ 10 million Small Business Emergency Assistance Guarantee program offering 50% guarantees on working capital loans and fee waivers on loans made through participating institutions NJEDA Premier Lender or Premier CDFI.
  • $ 150,000 for emergency technical assistance to New Jersey-based businesses requesting assistance through the US Small Business Administration.

2020 federal aid a fraction of the Great Recession dollars

Brandon McKoy, President and CEO, New Jersey Policy Perspective. Credit: Brandon McKoy.

While the state’s relief program is valuable, it will likely take significant federal economic stimulus to significantly improve the fortunes of New Jersey small business owners, said Brandon McKoy of the New Jersey think tank. Policy Perspective (NJPP) based in Trenton.

At present, however, federal funds appear largely to be directed towards specific health interventions.

This means that most of the financial aid that businesses have access to will come in the form of low-interest loans, which are even more in debt at a time when many have no income.

And while the new NJEDA programs reach a maximum of 5,000 small businesses, this is only a small fraction of the 861,000 that operate in the state.

States just aren’t well-funded enough to offer grants, especially those without “rainy day funds,” which New Jersey has long failed to complete, McKoy said.

“I think it appears to be EDA doing what it can with the tools it has,” McKoy said. “It is difficult for states to provide grants if the federal government does not react aggressively and on a large scale. ”

During the Great Recession of 2008, New Jersey received about $ 12 billion in federal aid; in the package that U.S. congressional lawmakers are due to vote on tomorrow, the state looks likely to bring in around $ 1.5 billion, “but most of it is for the coronavirus response, not the economic response,” said McKoy.

“Federal funds currently appear to be very specifically tailored for coronavirus-specific interventions, that is, health interventions,” he said. “At the moment, it doesn’t appear to be to make up for the revenue that states have lost.

“This is a big concern because I think the New Jersey departments are doing all they can and trying not to make the mistakes they made in the last recession that took us back 10 years. , but the flexibility the state has depends on the relief the federal government provides, ”McKoy said.

At a fundamental level, the issues the country faces about its economic and physical health are interrelated, McKoy said, because “the economy is people; how we interact with each other.

If a blanket shutdown is the responsible and lifesaving approach that nonetheless sacrifices the economy, then governments should “project a bit and see the impact” to determine where they can step in with political solutions, he said. .

“There are specific needs that workers, families, businesses are going to have, and ultimately, the institutions with the power to change tax rates, change interest rates and provide metrics. important stimulus are public institutions and not private institutions. “McKoy said.

“We need to do a better job of giving the government the resources to respond, having not only the money on hand, but the staff available to respond,” he said. “We can go through paid sick leave and trade relief, but if the Department of Labor, Community Affairs, Health doesn’t have the staff, skills and talents to administer it, it’s really a problem. unfunded mandate, just words on paper. ”

Bitterly, the state had pledged to reinvest in its emergency fund before the COVID-19 pandemic and had forecast a surplus of $ 1.6 billion. Today’s leaders are faced with longer-term choices of how to handle the current crisis, given some shortcomings.

Gov. Phil Murphy signaled Thursday that the deadline for filing state taxes could be extended, but it also creates problems with revenue collection, McKoy said. Additionally, the state cannot make a decision on the Personal Income Tax Credit (EITC) until federal decisions have been made without adding a step to its own budgeting process.

“It’s not difficult, it’s just one more thing we have to do,” he said.

“There are no right answers here because we haven’t planned; we have failed to set aside the income in emergency funds, ”McKoy said. “Now we have a bunch of bad options. I hope this is a time when people realize how important it is to have a strong public sector. ”

Read our ongoing summary of COVID-19 coverage here.

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