Six NJ Banks to Provide Low-Cost Coronavirus Loans to Small Businesses, Nonprofits

TRENTON, NJ—The New Jersey Economic Development Authority announced on Friday partnerships with six Community Development Financial Institutions to provide between $20 million to $30 million in low-cost financing to small and micro-businesses and nonprofits impacted by the COVID-19 outbreak.

New Jersey Community Capital, UCEDC, Regional Business Assistance Corporate, Cooperative Business Assistance Corporation, Greater Newark Enterprise Corporation (GNAC) and 1st Bergen Federal Credit Union will be participating in the authority’s new CDFI Emergency Loan Loss Reserve Fund.

The lenders, with the exception of 1st Bergen Federal Credit, will also take part in the new CDFI Emergency Assistance Grant Program, according to the NJEDA.

“Micro-businesses, nonprofits, and other small businesses that rely on CDFIs for the capital they need to grow are a vital component of New Jersey’s economy. They have been hit particularly hard by the COVID-19 outbreak,” said NJEDA Chief Executive Officer Tim Sullivan. “These partnerships will allow CDFIs to expand their operations to help more businesses withstand today’s challenges and return to full strength as soon as possible.”

The CDFI Emergency Loan Loss Reserve Fund is a $10-million capital reserve fund that the NJEDA will use to take a first loss position on CDFI COVID-related loans that provide low-interest working capital to micro-CObusinesses that have been negatively impacted by the outbreak. The NJEDA will back these loans up to 50% if they default in the future. This will allow the CDFI partners to increase their capacity and participate in more loans, at flexible term and lower interest rates, the NJEDA states.

The CDFI Emergency Assistance Grant Program is a $1.25-million program that will provide five CDFIs grants of $250,000. These grants will help the CDFIs scale their operations due to the high demand for assistance from business owners and buy down interest rates on their loans to offer borrowers more flexible loan terms at lower rates to help small and micro businesses survive during this COVID-19 outbreak.

In March, the NJEDA announced a suite of COVID-19 initiatives focused on businesses that have been most impacted by the novel coronavirus outbreak: local small businesses, mid-size businesses that have had to close or drastically reconfigure operations, and new businesses that were just getting on their feet before the crisis hit. The programs provide a variety of compatible offerings that address these businesses’ varied needs and include mechanisms to provide funding and assistance as quickly as possible.