NJEDA Offers $75M for Small Businesses Affected by Coronavirus, Mostly Loans


The agency says its resources could touch 3,000 to 5,000 small businesses affected by COVID-19. But without federal grant aid, small business owners could be racking up more debt.

By Matt Skoufalos | March 26, 2020

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

The new initiatives include:

  • a $5-million Small Business Emergency Assistance Grant Program, which will provide as much as $5,000 to small businesses in “retail, arts, entertainment, recreation, accommodation, food and other services – such as repair, maintenance, personal, and laundry services – to stabilize their operations and reduce the need for layoffs or furloughs.” Only businesses with at least one employee are eligible.
  • a $10-million Small Business Emergency Assistance Loan Program, offering working capital loans up to $100,000 to businesses with less than $5 million in revenues. The program offers 10-year repayments, with 0-percent interest for the first five years, and then a prevailing floor rate (capped at 3 percent) for the next five.
  • a $10-million Community Development Finance Institution (CDFI) Emergency Loan Loss Reserve Fund to provide low-interest working capital to micro-businesses and to withstand COVID-19 loan defaults.
  • $1.25 million in CDFI emergency assistance grants Program, offering as much as $250,000 to CDFIs to scale operations or reduce interest rates for the duration of the outbreak.
  • $5 million in “entrepreneur support” to guarantee 80 percent of working capital loans for entrepreneurs.
  • a $10-million small business emergency assistance guarantee program offering 50-percent guarantees on working capital loans and waiving fees on loans made through institutions participating NJEDA Premier Lender or Premier CDFI programs.
  • $150,000 for emergency technical assistance to New Jersey-based companies applying for assistance through the U.S. Small Business Administration.


2020 federal aid a fraction of Great Recession dollars

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

Although the state relief package is valuable, it will likely take significant federal economic stimulus to meaningfully improve the fortunes of New Jersey small business owners, said Brandon McKoy of Trenton-based thinktank New Jersey Policy Perspective (NJPP).

Right now, however, federal funds seem largely directed to health-specific interventions.

That means that most of the financial support to which businesses have access will come in the form of low-interest loans, which are still more debt at a time when many don’t have income.

And even if the new NJEDA programs touch 5,000 small businesses at the most, that’s a small fraction of the 861,000 that operate in the state.

States simply aren’t funded well enough to offer grant aid, especially those without a “rainy-day fund,” which New Jersey has long failed to supplement, McKoy said.

“I think this seems to be EDA doing what it can with the tools it has,” McKoy said. “It’s hard for states to give grants if the federal government does not respond aggressively, and at scale.”

In the Great Recession of 2008, New Jersey received about $12 billion in federal support; in the package U.S. Congressional lawmakers are set to vote on tomorrow, the state seems likely to net about $1.5 billion, “but most of that is for coronavirus response, not economic response,” McKoy said.

“The federal funds right now seem to be very specifically tailored to coronavirus-specific intervention, meaning health intervention,” he said. “At this moment, it doesn’t seem like it’s for backfilling revenue that states have lost.

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

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

If a widespread shutdown is the responsible, life-saving approach that nonetheless sacrifices the economy, then governments should “project out a little bit and see the impact” to determine where they can intervene with policy solutions, he said.

“There’s specific needs that workers, families, businesses are going to have, and at the end of the day, the institutions with the power to change tax rates, to change interest rates, and to provide significant stimulus are public institutions, not private institutions,” McKoy said.

“We need to do a better job of giving government the resources to react, having not just the cash on hand, but the personnel on hand to respond,” he said. “We can pass paid sick leave and business relief, but if the Department of Labor, of Community Affairs, of Health doesn’t have the staff, skill, and talents to administer it, it’s really an unfunded mandate, just words on paper.”

Bitterly, the state had pledged to reinvest in its emergency contingency fund prior to the COVID-19 pandemic, and had anticipated a $1.6-billion surplus. Now leaders face longer-term choices about how to manage the crisis at hand given certain shortfalls.

Governor Phil Murphy signaled Thursday that the deadline to file state taxes may be pushed back, but doing so also creates revenue collection problems, McKoy said. Plus, the state can’t make a determination on individuals’ Earned Income Tax Credit (EITC) until federal determinations have been made without adding a step to its own budgeting process.

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

“There are no good answers here because we have failed to plan; we have failed to put away revenues in the emergency funds,” McKoy said. “Now we have a bunch of bad options. I hope this is a moment where people realize how important having a strong public sector is.”

Read our ongoing round-up of COVID-19 coverage here.

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