RECOVERY LOAN LOSS RESERVE FUND
The NJEDA is now accepting applications for this program.
Please click “APPLY HERE” on the side of this page to start an application.
The Recovery Loan Loss Reserve Fund (“the Fund”) will offer 50% loan guarantees to qualified Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) that will create or have an existing eligible loan program that meets the necessary requirements per NJEDA and the federal State Small Business Credit Initiative (SSBCI) criteria. Each entity is eligible for an allocation of up to $2.5 million per entity with a performance period to ensure the program is being utilized and to also assess the potential for an increase in allocation.
PROGRAM DETAILS
This product will allow CDFIs and MDIs to offer an expanded loan product suite to create more robust products that can better serve the entities and small businesses throughout NJ.
The creation of the Recovery Loan Loss Reserve Fund (“the Fund”) will provide Community Development Financial Institutions(CDFIs) and Minority Depository Institutions (MDIs) the ability to provide working capital loans by leveraging their own non-federal resources using a one-to-one match. CDFIs/MDIs must register eligible loans with NJEDA within 90 days after the loan closing to receive the loan guarantee of up to 50%. The loan guarantee will remain throughout the term of the loan in case of a future default allowing the CDFI/MDI to take on more risk and exposure and do more lending. Each CDFI/MDI awardee will be responsible for SSBCI reporting and compliance and only loans that meet the terms of the NJEDA Master Guarantee Agreement will be eligible under this guarantee.
This product will allow these entities to opt in for an allocation up to $2.5 million per entity at time of application. Eligible CDFIs and MDIs will have a performance period to ensure the program is being utilized which may allow for an increase to their allocation.
ELIGIBILTY
Eligible Applicants
All entities must have small and micro business lending experience. The CDFIs and MDIs can be based outside of NJ but must use the funds to service eligible NJ based businesses only.
- Must be a certified Community Development Finance Institutions (CDFI) by the US Department of Treasury or a Minority Depository Institution (MDI) recognized by FDIC and provide current certification by U.S. Department of Treasury or FDIC to support a MDI status.
- Must be able to demonstrate they have the capacity to create/run a program and attract applicants, underwrite, and approve financial assistance (loan program) that meet the defined parameters as stated in the memo.
- Must provide a current NJ Tax Clearance Certificate
- Applicant must be in good standing with Department of Labor and Department of Environmental Protection
- Must complete a legal debarment questionnaire.
- Must provide an assurance affirming that no principal of the financial institution lender has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. §16911).
Eligible Loan Criteria
Loan guarantees are only applicable to new or existing lending programs that would include the following features:
- Loan minimum is $10,000 and maximum is $250,000
- Applicants can be for-profit or non-profit entities with commercial business locations within NJ.
- Loan interest rate cannot exceed 12%,
- Loan can include deferred payments, moratoriums or interest only for up to 12 months,
- Loan term cannot exceed 7 years,
- Collateral and personal guarantees are permissible but not required
- Minimum global debt service coverage ratio of 1.0
- If creating a new program then minimum credit score must be under 650
- Loans may be used by the business for operating expenses only.
- Examples of permitted uses include payroll, marketing, inventory, rent, mortgage/property tax payments, utilities, or any other expenses that are applicable to the daily operation of the business.
- Ineligible expense uses: any refinancing of existing debt, purchases of equipment, construction, reconstruction, demolition, alteration, repair work, maintenance work, or construction related to installation of equipment where such activity exceeds $1,999.99.
- Loans must be made to applicants that are in good standing with NJ Department of Taxation and must provide a current tax clearance certificate when the loan is registered with NJEDA.
- CDFIs and MDIs that have received grants from NJEDA to create lending products or provide technical assistance (i.e., Main Street Lenders Grant) cannot use this guarantee program to support the same recipients of that loan program. Businesses could be served with the technical assistance support and be registered under this program.
- Loans provided by the CDFIs and MDIs and registered under the product must meet all SSBCI requirements.
- Must provide an assurance affirming that no principal of the borrowing entity has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. § 16911)).
- Loan must be registered with NJEDA within 90 days after the closing date of the loan by the CDFI/MDI. Loans beyond this window will not be eligible to be covered by the guaranteed allocation.
Prohibited businesses to lend to include:
- A business engaged in gambling or gaming activities; the conduct or purveyance of “adult” (i.e., pornographic, lewd, prurient,
obscene or otherwise similarly disreputable) activities, services, products or materials (including nude or semi-nude performances or the sale of sexual aids or devices); any auction or bankruptcy or fire or “lost-our-lease” or “going- out-of-business” or similar sale; sales by transient merchants, Christmas tree sales or other outdoor storage; any activity constituting a nuisance; or any illegal purposes. - A business engaged in speculative activities that profit from fluctuations in price, such as wildcatting for oil and dealing in
commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business or through the normal course of trade; - A business that earns more than half of its annual net revenue from lending activities, unless the business is (1) a CDFI/MDI that is not a depository institution or a bank holding company, or (2) a Tribal enterprise lender that is not a depository institution or a bank holding company;
- A business engaged in pyramid sales, where a participant’s primary incentive is based on the sales made by an ever-increasing
number of participants; - A business engaged in activities that are prohibited by federal law or, if permitted by federal law, applicable law in the jurisdiction where the business is located or conducted (this includes businesses that make, sell, service, or distribute products or services used in connection with illegal activity, unless such use can be shown to be completely outside of the business’s intended market); this category of businesses includes direct and indirect marijuana businesses, as defined in SBA Standard Operating
Procedure 50 10 6; or - A business deriving more than one-third of gross annual revenue from legal gambling activities, unless the business is a Tribal SSBCI participant, in which case the Tribal SSBCI participant is prohibited from using SSBCI funds for gaming activities, but is not restricted from using SSBCI funds for non-gaming activities merely due to an organizational tie to a gaming business; “gaming activities” for purposes of Tribal SSBCI programs is defined as Class II and Class III gaming under the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. § 2703.
Please be advised: New Jersey State law prohibits most cannabis license and certification holders from receiving or continuing to receive an economic incentive from the NJEDA. If the applicant, or any person who controls the applicant or owns or controls more than one percent of the stock of the applicant, has applied for or received a license or a certification from the New Jersey Cannabis Regulatory Commission (NJ-CRC), the applicant is ineligible for this program and should not proceed with an application. If an application is received from an applicant that meets this criteria, the application will be declined and the application fee will not be refunded.
GUARANTEE AMOUNT
Loan program funding cannot be used from a federal source due to the State Small Business Credit Initiative (SSBCI) support contributing to the Fund.
that could result in the maximum guarantee exceeding $2.5 million as requested.
PROGRAM GUIDE
QUESTIONS
For more information or to ask a specific question please send an email to businessbanking@njeda.gov and a team member will reach out to you.
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