(TRENTON) – Legislation Assembly Democrats Tim Eustace, Bonnie Watson Coleman and Patrick J. Diegnan Jr. sponsored to create a small business loan program to help create jobs and spark economic development was released Thursday by an Assembly panel.
“The global economic decline caused by the Great Recession placed very tight credit conditions on the availability of loans to small businesses from private financial institutions, impeding the expansion of small businesses and restricting their ability to improve the state’s economy,” said Eustace (D-Bergen/Passaic). “Clearly, we need to assist small businesses in making direct investments in their businesses to support capital purchases and operating expenses, including new hires and employee training.”
“The New Jersey Economic Development Authority offers loan and programs to assist small businesses, but the strict criteria established for guaranteeing loans should be broadened to take into account current economic and credit conditions,” said Watson Coleman (D-Mercer/Hunterdon). “For example, according to the authority, since the establishment of its Main Street Business Assistance Program in January 2009 and continuing through October 2012, the authority guaranteed loans to only 29 small business projects. We need to do better.”
“We must remain focused on job creation and economic development, and small businesses are the lifeblood of this state’s economy,” said Diegnan (D-Middlesex). “Anything we can do to help small businesses make investments and create jobs is a good thing, especially as New Jersey’s economy continues to lag behind the rest of the nation.”
The bill (A-3795) directs the New Jersey Economic Development Authority to establish a small business loan guarantee program to provide loan guarantees of up to 100 percent of the value of the loan in amounts not less than $25,000 but not to exceed $250,000 to eligible small businesses, which may use the loan guarantee funds to support the businesses’ capital purchases and operating expenses, including, but not limited to, employee training and salaries for new positions, as determined by the authority.
An “eligible small business” is defined to mean a business entity that, at the time of application for participation in the program is: (1) independently owned and operated; (2) organized for profit with a place of business located in this State; (3) operated primarily within this State; (4) employing less than 100 full-time employees; (5) not dominant in its field; (6) not raising, or has not raised, $10,000,000 or more in total equity financing; and (7) not receiving, or has not received, $10,000,000 or more in financing from any source.
An eligible small business would enter into a small business loan guarantee agreement with the authority.
Loan guarantees would be provided for loans having a current market interest rate as determined by the authority if the eligible small business commits to increasing its full-time employment level by more than 10 percent, or by one full-time employee for businesses employing less than 10 full-time employees at the time of application, whichever is greater, within four calendar years after the date on which the loan guarantee funds are disbursed to the business.
Unless subject to federal law, rule, or regulation, each eligible small business that receives a loan guarantee under the bill shall undergo an audit, at its own expense, at least once every two calendar years. The authority shall designate an auditor to conduct the audit. Every loan guarantee agreement shall provide that any loan guaranteed by the authority shall be voided if the terms and conditions of the agreement are violated by the eligible small business party to that agreement.
To implement the program, the authority is directed to establish and maintain a special revolving fund to be known as the “Small Business Loan Guarantee Fund,” which may be credited with: (1) such moneys from the economic growth account of the “Economic Recovery Fund,” which the authority determines are necessary to effectively implement the program, within the limits of funding available from the Economic Recovery Fund, based upon the response to the program; (2) any moneys that shall be received by the authority from the repayment of the moneys in the “Small Business Loan Guarantee Fund” used to provide small business loan guarantees and interest thereon; (3) any moneys as may be available to the authority from business assistance programs administered by the authority or by other State agencies or authorities; (4) appropriations made by the Legislature; (5) fees collected from applicants and (6) other moneys made available including, but not limited to, funds provided by agreement with private investors, small business investment corporations, banks, and other lending institutions.
The bill was released by the Assembly Budget Committee.
