Aiming to provide financial assistance to the many small businesses impacted by the COVID-19 pandemic, Assembly Democrats Gary Schaer, Eliana Pintor Marin and Andrew Zwicker sponsor a bill to create a program that would allow the New Jersey Economic Development Authority (EDA) to make investments in businesses that have been financially harmed by major economic emergencies. The legislation was advanced by the Assembly Commerce and Economic Development Committee on Monday.
As a result of the pandemic, over 40 percent of small businesses have said they are about to exhaust their cash reserves while 16 percent already have. More than one-third of New Jersey businesses were also unable to pay their November rent. Compared to the prior year, monthly revenues have decreased throughout the state since the beginning of the public health emergency.
“This pandemic hit us early, and it hit us hard – impacting not only the health of our residents, but the strength of our economy,” said Assemblyman Schaer (D-Bergen, Passaic). “Between necessary business restrictions aimed at containing this virus and a lack of consumer confidence or spending power, our businesses are really struggling right now. We must be able to invest in New Jersey companies during times of crisis to help them make it through to the other side.”
The ‘Economic Emergency Investment Stabilization Act’ (A-4330) would create a program, modeled after an existing EDA pilot program, that would allow the EDA to make direct equity investments in New Jersey-based businesses facing financial hardship as a result of a major economic emergency. These investments would be made by purchasing shares of the company in exchange for a minority stake in the business.
“Since the first confirmed case, New Jersey has been fighting to find a balance between public health and economic concerns as we work to contain this virus,” said Assemblywoman Pintor Marin (D-Essex). “We recognized the potentially devastating impact the pandemic has had on businesses throughout the state and have prioritized efforts to help as many as possible. A program like this, that invests in struggling companies in order to help them stabilize and thrive again, will provide a significant tool for us to offer in support of the business community.”
In order to make these investments, the EDA would create a revolving, self-sustaining fund to use in the event of an emergency. A situation would be considered a major economic emergency if the Governor declares a state of emergency due to a public health crisis or natural disaster that causes a major disruption to the state’s economy, resulting in decreased revenues and increased unemployment.
The EDA would make an investment of $100,000 to $1,000,000 in qualified businesses located within the state. In order to qualify, applicants would have to indicate their business’ financial stability prior to the economic emergency, their plans for the funding, and their long-term recovery prospects.
The investment would be withdrawn within one to ten years, at a time the EDA determines would be most financially beneficial to the stabilization fund.
“Sometimes circumstances outside of our control present us with nearly insurmountable challenges,” said Assemblyman Zwicker (D-Somerset, Hunterdon, Mercer, Middlesex). “It’s times like these that a helping hand – such as an investment in a business someone has worked hard to build – can go a long way. This program will make a difference in the lives of countless residents whose businesses and jobs could be saved with just a little help.”
The legislation now heads to the Assembly Speaker for further consideration.