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New Jersey businesses now have additional resources to help them face the financial challenges of the national recession.
Two state programs established under Gov. Jon S. Corzine’s Economic Assistance and Recovery Plan have made $170 million in new funding available to encourage capital investment and job creation and retention. The governor’s comprehensive plan to stimulate New Jersey’s economy, create jobs, combat hunger, provide home energy assistance, and take steps to prevent home foreclosures was announced in October.
McKella 280 Inc., a Pennsauken-based business providing graphic design, digital imaging, printing, and fulfillment services, closed a $1.2 million line of credit with Susquehanna Bank that includes a $250,000 guarantee provided through the EDA's Main Street Business Assistance Program. McKella also closed a $2 million loan with Susquehanna Bank that includes $500,000 from the EDA and a $375,000 guarantee of the bank's portion of the loan under the EDA's Statewide Loan Pool for Business program. The company provides 98 jobs.
Some businesses that are looking to expand, or just survive, in the current economic climate have found it more difficult to obtain adequate credit from their banks. One new initiative, the Main Street Business Assistance Program, offers state support to encourage bank lending to small and mid-size businesses and nonprofit organizations in New Jersey through loan participation and credit enhancement. The program is designed specifically to help banks provide funding to creditworthy companies so they can weather the economic downturn, continue their growth, and remain competitive in New Jersey.
Developed in partnership with the state’s banking community and the New Jersey departments of Banking and Insurance and Treasury, the Main Street program has been funded by a $50 million state appropriation and is being administered by the New Jersey Economic Development Authority (EDA). The investment will potentially leverage more than $200 million in bank funding for businesses and nonprofit organizations in New Jersey.
The Main Street program has two components: a loan participation and guarantee product for bank financing, and a line of credit guarantee offered for the first time through the EDA’s 14 preferred lender-partners.
For term loans secured by fixed assets like buildings and equipment, the EDA will provide a maximum participation of 25 percent up to $1 million in a bank loan and a maximum bank loan guarantee of 50 percent up to $2 million. For working capital loans, the EDA will provide up to 25 percent of a bank loan, not to exceed $750,000, and a maximum guarantee of 50 percent up to $1.5 million. The interest rate on EDA loan participations is fixed at 5 percent for a maximum of five years. Borrowers also can use the Main Street program to refinance higher-interest debt. The line of credit guarantee, which can be used for fixed assets or working capital, is set at a maximum of 50 percent of the bank amount up to $250,000. The aggregate EDA exposure cannot exceed $2 million, or 50 percent, of the total transaction.
A specialty food market and catering service in Mount Laurel was the first business to finalize funding under the program earlier this year. Abbruzzi and Giunta’s Italian Market and Catering closed a $1,546,000 loan with Cornerstone Bank that includes $211,000 from the EDA. The loan will be used to consolidate existing financing and expand the market’s catering business.
Mark Giunta, co-owner of Abbruzzi and Giunta's Italian market in Mount Laurel, N.J., is expanding the market with a loan from Cornerstone Bank that includes a participation from the NJEDA's Main Street program.
More than 1,000 applications have been submitted for another new EDA-managed program called InvestNJ. This $120 million statefunded program offers a $3,000 grant to New Jersey businesses for each new job created and retained for one year, not to exceed $500,000 per grantee. It also authorizes the payment of grants equal to 7 percent of a business’s qualifying capital investment of at least $5,000 made prior to January 1, 2011, with a maximum of $1 million per grantee.
Applications received show that companies plan to create nearly 24,000 new jobs and make capital investments totaling close to $100 million in their projects.
Because the allocation for this grant program has been exhausted, new applicants are currently being placed on a waiting list and will be considered on a first-come, first-served basis if earlier applicants do not meet program qualifications.
Dave Wiggins is completing the purchase of A-1 Millwork, a manufacturer of doors, staircases, and premium moldings in Waterford, N.J., with a direct loan from the EDA. The 35-year-old company has 13 employees.
The recently enacted federal American Recovery and Reinvestment Act is an excellent complement to Governor Corzine’s state plan. One of its components expands uses for tax-exempt bond financing, which can help generate business growth and community investment in New Jersey.
For many years, the EDA has been the conduit bond issuer for federally authorized tax-exempt bond financing available to manufacturers and other qualified borrowers. Many tax-exempt bonds are purchased directly by banks and other financial institutions. Since 2006, for example, the EDA has provided nearly $180 million to 50 manufacturers, supporting the creation of 1,200 new jobs and over $260 million in total capital investment.
This new two-year federal initiative expands the definition of manufacturing to include the creation or production of intangible property, such as a patent, copyright, formula, process, design, pattern, format, or other similar item, thus opening this low-cost, long-term financing to companies within the technology and pharmaceutical industries. Prior to the act, only facilities involved in the manufacturing of tangible property were eligible.
To learn more about these initiatives, visit www.njeda.com or call 1-866-534-7789.