The Paycheck Protection Program (PPP), introduced in the CARES Act, is the Small Business Administration’s (SBA) relief program designed to deliver loans eligible for forgiveness to many small businesses with employee headcounts lower than 500.
However, the PPP is not available to many businesses with fewer than 500 employees because entities eligible to apply for PPP loans are subject to the SBA’s existing rules on entity affiliation. This has left many entities with more complex equity and ownership structures and so-called affiliate relationships (most notably debt and equity investments and structures with private equity firms and venture capital firms) excluded from qualifying for PPP loans. In most cases, when such investment vehicles maintain control over the company, as defined, the company will be considered together with the controlling investor’s affiliates for purposes of determining eligibility.
In this article, we will explore a small business relief program available to New Jersey companies that may not have qualified for PPP because of the SBA’s existing rules on entity affiliation.
New Jersey Entrepreneur Support
The New Jersey Entrepreneurship Guarantee Program represents an effort by the New Jersey Economic Development Authority (NJEDA) to encourage private sector investors to continue supporting the businesses and start-ups they already hold a stake in.
This $5 million program provides a guarantee of investor loans advanced to entrepreneurial companies that have been impacted by COVID-19. These loans must come from existing investors who have previously purchased notes, or made equity agreements on or prior to March 9, 2020. Sources of investment may include individuals, trusts and corporations, among others.
Through this program, the NJEDA will guarantee up to 80% of subsequent investment totals, not to exceed $200,000 per NJ entrepreneurial company.
To see if your business qualifies for this program or others currently available, complete the NJ COVID-19 Business Support Eligibility Wizard. Applications are expected to be available in the coming weeks and will be considered on a first come, first serve rolling basis.
In order to qualify, businesses must meet certain criteria, including having:
- At least 50% of employees in New Jersey
- Fewer than 25 employees
- Revenue under $5 million
- A corporate headquarters in New Jersey
- A business in one of the following sectors: 1) advanced manufacturing, 2) information/technology, 3) life sciences, 4) finance and insurance, 5) clean energy, 6) food and beverage, 7) advanced transportation, 8) film and digital media
- Registration in New Jersey and be in good tax standing
- Good standing with the Department of Labor and Workforce Development
We ask that you and your organization visit the NJEDA website for additional information as it relates to these and other programs at New Jersey’s Coronavirus Business Resource Center. And as always, reach out to your Friedman advisor with any questions.