Business loan

Removal of collateral requirement for Main Street micro business loans

Economic development

Application for loans up to $50,000 to launch October 6

The New Jersey Economic Development Authority (NJEDA) Board of Directors today approved a revision to the Main Street Micro-Business Loan, removing the requirement for personal guarantees from micro-business owners.

The Main Street Micro Business Loan, a successor to the micro business loan program established by NJEDA in 2019, is offered as part of the Main Street Recovery Fund, a $150 million suite of products created or expanded under of the Economic Recovery Act of 2020 (ERA), signed by Governor Phil Murphy in 2021.

This pilot product will provide funding of up to $50,000 to eligible New Jersey micro-businesses with annual gross revenues of $1,500,000 or less and with 10 or fewer full-time employees at the time of application and three months before the date of the request. NJEDA will begin accepting applications for the program on Thursday, October 6 at 10:00 a.m. EDT.

Qualifying for-profit and nonprofit businesses registered to do business in New Jersey, including home-based businesses, can apply for funding from the $20 million in funds allocated by the Main Street Recovery Fund to cover only future operating expenses such as inventory, rent, payroll, equipment (which does not require installation or construction work totaling more than $1,999.99) or any other working capital to finance the company’s operating expenses. The loan will have a standard term of 10 years and the interest rate will be 2%, with no interest or payments due for the first year.

The Main Street Micro-Business Loan has a significant forgiveness component, as it helps reduce the burden on micro-business owners who already have limited access to capital. According to the rules of the program, the borrower is required to make payments from the second year to the end of the fifth year. To be eligible for loan forgiveness, the applicant must have made their loan payments as stated in their loan agreement with no more than 90 days in arrears, have no current payment defaults, be able to certify that he used the loan for approved purposes only, and that they are still open and operating as stated in the loan agreement.

To ensure equitable and inclusive access to the Main Street Micro-Business Loan, of the $20 million in total funding available, $8 million will be set aside to support eligible entities located in eligible census tracts in the Main Street area. New Jersey Opportunity.

Eligibility requirements for micro-enterprises interested in applying for this program include:

  • Must have less than $1.5 million in annual gross revenue for the most recent fiscal year (as long as the business has annual revenue)
  • Must have no more than 10 full-time employees at the time of application and three months prior to application
  • Must be legally registered to do business in New Jersey, with a business location (including a home office) in New Jersey
  • Must have been trained at least six months prior to application date.
  • Must be in good standing with the New Jersey Department of Labor and Workforce Development (LWD) and the NJ Department of Environmental Protection at the time of application
  • Must provide a current tax clearance certificate prior to approval to demonstrate that the applicant is in good standing with the NJ Division of Taxation

The Main Street micro business loan will not require collateral as the underwriting criteria will be based solely on credit rating. Only not-for-profit organizations will need to be fully underwritten and required to meet a debt service coverage ratio of 1.0. For all other for-profit entities, at least one owner must have a credit score of 600 or higher to be considered eligible. The personal guarantees of the owners or principals are not required.

Main Street micro business loan applications will be considered on a first come, first served basis based on the date/time the Authority receives the completed application. Former recipients of the Micro Business Loan Program are eligible to apply for the Main Street Micro Business Loan. Due to the favorable conditions of this product, only one application per EIN is allowed.

NJEDA will host a Main Street Micro-Business Lending Information Session on Monday, September 26 at 2:00 p.m. EDT. To register for this online session, click here.

To access more business news, visit NJB News Now.

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