How is the NJEDA partnering with CDFIs to support low-cost financing for small businesses and nonprofits impacted by COVID?
On April 17, 2020, the New Jersey Economic Development Authority (NJEDA) announced partnerships with six Community Development Financial Institutions (CDFIs). These partnerships leverage New Jersey-based CDFIs to provide between $20 million and $30 million in low-cost financing to small and microbusinesses and nonprofits impacted by the COVID-19 outbreak. The NJEDA’s role in these programs is to support participating CDFIs. Businesses and nonprofits seeking financing should contact the CDFIs directly.
New Jersey Community Capital (NJCC), UCEDC, Regional Business Assistance Corporate (RBAC), Cooperative Business Assistance Corporation (CBAC), Greater Newark Enterprise Corporation (GNEC), and 1st Bergen Federal Credit Union are participating in the Authority’s CDFI Emergency Loan Loss Reserve Fund, and all but 1st Bergen Federal Credit Union also took part in the CDFI Emergency Assistance Grant Program.
The CDFI Emergency Loan Loss Reserve Fund is a $10 million capital reserve fund that the NJEDA is using to take a first loss position on CDFI COVID-related loans that provide low-interest working capital to microbusinesses that have been negatively impacted by the pandemic. The NJEDA is backing these loans up to 50% if they default in the future. This allows the CDFI partners to increase their capacity and participate in more loans, at flexible terms and lower interest rates.
The CDFI Emergency Assistance Grant Program provided five CDFIs grants of $250,000. These grants helped the CDFIs scale their operations in response to high demand for assistance from business owners impacted by the pandemic and buy down interest rates on their loans to offer borrowers more flexible loan terms at lower rates.
The NJEDA’s Micro Lender Support Grant Program is a pilot program that will make $2 million available to provide grants of up to $200,000 to CDFIs, Minority Depository Institutions (MDIs), and other eligible lenders as identified in the Economic Recovery Act. This program DOES NOT provide grants directly to small businesses. Grant funds received through the program can be used to fund operating expenses associated with servicing micro businesses and the buying down of interest rates of loans offered to micro businesses. CDFIs and MDIs based outside New Jersey that service New Jersey businesses will be eligible to receive funds, which will reduce the financial burden on New Jersey-based CDFIs and create new financing opportunities for New Jersey businesses. Applications will open on April 19, 2021. Organizations interested in learning more about the program are encouraged to contact firstname.lastname@example.org.