Main Street Micro Business Loan Collateral Requirement Removed

Application for Loans up to $50,000 to Launch on Oct. 6

On Sep 14, 2022

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

The Main Street Micro Business Loan, which succeeds the Micro Business Loan Program established by the NJEDA in 2019, is offered as part of the Main Street Recovery Fund—a $150 million suite of products created or expanded under the Economic Recovery Act of 2020 (ERA), signed by Gov. Phil Murphy in 2021.

This pilot product 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 have 10 or fewer full-time employees at the time of application and three months prior to the date of application. The NJEDA will start accepting applications for the program on Thursday, Oct. 6 at 10:00 a.m. EDT.

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

The Main Street Micro Business Loan has a substantial forgivable component as it helps reduce the burden on micro business owners who already have limited access to capital. Under program rules, the borrower is required to make payments from year two to the end of year five. To qualify for loan forgiveness, the applicant must have made their loan payments as identified in their loan agreement with no delinquency of more than 90 days, have no current default, be able to certify that they have used the loan for approved purposes only, and that they are still open and operating as detailed 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 New Jersey Opportunity Zone-eligible census tracts.

Eligibility requirements for micro businesses interested in applying for this program include:

• Must have less than $1.5 million in annual gross revenue for the most current fiscal year (to the extent the business has annual revenues)
• 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 formed 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 the NJ Department of Environmental Protection at the time of application
• Must provide a current tax clearance certificate prior to approval to demonstrate 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 score. Only not-profit organizations will need to be fully underwritten and required to meet a 1.0 debt service coverage ratio. For all other for-profit entities, at least one owner must have a credit score of 600 or greater to be considered eligible. Personal guarantees from owners or principals are not required.

Applications for the Main Street Micro Business Loan will be reviewed on a first-come, first-served basis, based on the date/time at which the Authority receives the completed application. Past recipients of the Micro Business Loan Program are eligible to apply for the Main Street Micro Business Loan. Due to the favorable terms of this product only one application per EIN is allowed.

The NJEDA will host an information session on the Main Street Micro Business Loan on Monday, Sept. 26 at 2:00 p.m. EDT. To register for this online session, click here.

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