Main Street Micro Business Loan Program Open for Applications October 6

The New Jersey Economic Development Authority (NJRDA) has approved changes to the Main Street Micro Business Loan Program. These changes include the removal of the requirement for personal guarantees from owners of micro businesses. The NJEDA will start accepting applications for the program on Thursday, October 6, 2022, at 10:00 a.m. The Main Street Micro Business Loan Program is the successor to the Micro Business Loan Program established by the NJEDA in 2019.

What is it

This program will provide financing of up to $50,000 to eligible micro businesses in New Jersey whose annual gross revenues are $1,500,000 or less, and has 10 or fewer full-time employees at the time of application and three month prior to the date of application. Those who are eligible to apply for the loan include for-profit, non-profit, and home-based businesses registered to do business in New Jersey with a business location, including a home office, in New Jersey. The program has recently been updated to be broadened to enable support for more micro businesses. This consists of offering flexible loan terms and a generous forgiveness component. These changes have made the program more flexible and accessible to smaller, or micro, businesses.

What is required

To qualify for the Main Street Micro Business Loan, you must be a nonprofit, for profit, or home-based micro business that meets the following requirements:

• The annual gross revenue for the most current fiscal year must be less than $1.5 million
• At least one owner must have a credit score of at least a 600 from at least one of the major three credit reporting agencies – Equifax, Experian, or Transunion
• No more than 10 full-time employees who all must work in New Jersey as evidenced by WR-30 filings; part-time employees do not count
• Must be legally registered to do business in New Jersey and have a business location in New Jersey
• The business must have been in operation for at least six months prior to the date of application
• Must be in good standing with the New Jersey Department of Labor and Workforce Development (LWD) and New Jersey Department of Environmental Protection when applying for the loan
• Current tax clearance prior to approval must be provided to prove the applicant is in good standing with the New Jersey Division of Taxation

When completing the application, some sections will only appear if necessary based on prior responses. The process of applying will look different depending on your business. You will need to provide support of the use of funds with the prior three years of tax returns is available and if this is not possible for you, you will need to provide a financial profit and loss statement.

There is a nonrefundable fee of $100 at the time of application and a $400 closing fee. If you are paying via check, the application will be on hold until the state processes the check. Paying online will help expedite the review process.

Eligible vs Non-Eligible Uses

Eligible Uses

• Future operating expenses, which may be working capital to fund such future operating expenses
• Future inventory expenses
• Future purchases of equipment as long as installation and construction costs do not exceed $1,999.99

Non-Eligible Uses

• Refinancing of existing debt
• The reimbursement for expenses, costs, and/or purchases already paid by the business
• Personal non-business obligations or costs incurred by related entities
• Construction
• Equipment requiring installation or construction costs in excess of $1,999
• Rolling Stock – no cars, trucks, or vans can be purchased
• Home-based businesses cannot use loan proceeds for any residential cost; home mortgage, lease payments, etc.

Rates and Terms

The Main Street Micro Business loan has a standard 10-year term with a 2% interest rate that will be set at approval. During the first year after closing, no payments or interest will accrue and payments of principal and interest will begin year 2.

No payment term amendments are allowed before the end of the 5th year. All other modifications that are unrelated to the payment terms may be permitted throughout the term of the loan. If any payment terms are modified after the 5th year, the business will no longer be eligible for forgiveness.

To qualify for forgiveness for the balance of the loan at the end of the 5th year, the applicant must not be in default, current on all loan payments with no delinquency of more than 90 days, and be able to certify that they are still open and operating as detailed in the loan agreement

An informational session was held on Monday, September 26, 2022. If you were unable to attend and are looking for more information, visit the NJEDA’s page on the Main Street Micro Business Loan Program.

Cannabis businesses are currently not eligible for this loan program, but a program is currently being worked on to provide more options for cannabis dispensaries and businesses. To learn more about cannabusiness in New Jersey, sign up for the free virtual panel, The Business of Cannabis in South Jersey.

If you have any further questions regarding the Main Street Micro Business Loan, whether your business qualifies, and seeing if it is the right fit, contact an Alloy Silverstein advisor today!