Tim Sullivan, CEO of NJEDA
TRENTON, NJ – The New Jersey Economic Development Authority has launched a new pilot program providing funding to organizations that provide loans to micro-businesses and other small businesses that may not yet qualify for traditional bank finance.
As part of the Community Development Financial Institution initiative, NJEDA will provide CDFIs with up to $ 15 million to expand their small business financing capacity in New Jersey. Applications for the program are expected to be received in September 2019.
"Building a stronger and fairer economy begins with connecting small businesses with the resources they need to grow and expand," said Tim Sullivan, CEO of NJEDA. “CDFIs provide an important feature in lending to small businesses that are not yet ready for bank financing, and the CDFI initiative will improve CDFIs' ability to provide high-street micro and small businesses with the capital they need to grow into thriving businesses. ”
The CDFI initiative finances small businesses in two ways. The first option is through the Loans to Lenders component of the CDFI Initiative, where NJEDA provides up to $ 1.5M in direct loans to experienced CDFIs with proven lending and portfolio management history. The CDFIs will then use the NJEDA funding to administer term loans or lines of credit to qualified small businesses in New Jersey.
The second component of the CDFI initiative is the Premier CDFI program, in which NJEDA provides equity and guarantees of up to $ 500,000 for CDFI loans or working lines of credit for qualified small businesses in New Jersey. NJEDA's involvement gives CDFIs and the lending business more flexibility by reducing the CDFI's overall risk in the transaction, officials said.
NJEDA notes that the CDFI initiative is the direct result of feedback from CDFI leaders and other organizations that support small businesses in New Jersey. These discussions identified a need for an expanded partnership between the NJEDA and CDFIs, as well as an opportunity for CDFIs to work with the NJEDA in a role similar to that of traditional banks.
"One of the most common challenges we hear from business owners at NJEDA is that there aren't enough resources for companies looking to expand but can't qualify for traditional bank funding," said Christina, director of services for small business at NJEDA Fuentes. "The CDFI initiative fills an important gap and will play a critical role in helping municipal credit institutions make the necessary investments in small businesses to help them grow and thrive."