TRENTON, N.J. (July 14, 2020) – The New Jersey Economic Development Authority (NJEDA) today approved three Community Development Financial Institutions (CDFIs) to participate in the Authority’s Premier CDFI Program. Through the program, which incorporates CDFIs into the NJEDA’s existing Premier Lender Program, Union County Economic Development Corporation (UCEDC), Cooperative Business Assistance Corporation (CBAC), and New Jersey Community Capital (NJCC) will now have access to NJEDA participations and guarantees to support their loans to small businesses. The NJEDA also provided $1.5 million loans to the three CDFIs through the Authority’s CDFI Loan to Lenders Program.
“CDFIs are crucial partners in our work to build a stronger, fairer New Jersey economy and are particularly important now as business owners struggle to overcome the economic impacts of COVID-19,” said NJEDA Chief Executive Officer Tim Sullivan. “We are proud to partner with three leading CDFIs to launch the Premier CDFI Program and look forward to working with these organizations to help businesses recover from COVID-19 and build a more equitable, inclusive New Jersey economy.”
CDFIs are financial institutions that are certified by the Community Development Financial Institutions Fund at the U.S. Department of Treasury for the purpose of providing credit and financial services to underserved markets and populations. CDFIs share a common goal of helping businesses in low-income communities gain access to basic financial services, affordable credit, and investment capital. To be federally designated as a CDFI, a financial institution must certify that at least 60 percent of its financing activities are targeted to low- and moderate-income (LMI) populations or underserved communities.
“CDFIs are vital players in New Jersey’s economy that provide financing to businesses and organizations that are too small to qualify for traditional bank financing,” said UCEDC President Adam Farrah. “At a time when so many businesses are suffering and multiple studies have shown small minority- and women-owned businesses are at particular risk, working with the NJEDA to expand our capacity to provide accessible, low-cost financing will be vital to protecting New Jersey’s economy and laying the foundation for recovery.”
In 2019 the NJEDA created the CDFI Initiative, a $15 million program designed to help CDFIs expand their activity throughout the state. The program consists of two components: the CDFI Loans to Lenders Program, in which the Authority makes available loans of up to $1.5 million to experienced CDFls to increase their lending capacity, and the Premier CDFI Program, which expanded the NJEDA’s Premier Lender Program to include CDFIs. Similar to the Premier Lender Program, the Premier CDFI Program allows participating institutions to make participations, guarantees and direct loans of up to $500,000 available to qualified small businesses. Authority guarantees through the Premier CDFI Program may support CDFI term loans and working capital lines of credits, which reduces the CDFI’s total exposure in these transactions, thereby reducing risk and potentially lowering the cost of borrowing for the small businesses.
To access the program, CDFIs first must submit an application to the Authority for Premier CDFI status. The NJEDA then evaluates the organization’s history of lending and portfolio management. Once CDFIs are approved for Premier CDFI status, small businesses that are in discussions potential financing with a CDFI may apply, in partnership with the CDFI, to the Authority for a participation, guarantee, or direct loan of up to $500,000.
“Small businesses are the lifeblood of our communities, providing unique, personal service and job opportunities, but they often cannot access the same financing tools as larger competitors. At a time when COVID-19 has disrupted every aspect of our lives, with South Jersey being hit particularly hard, it is imperative that we do everything in our power to help small businesses weather the current crisis and prepare for the future,” said CBAC President and CEO Harry Stone. “We are proud to partner with the NJEDA expand our capacity to serve more business owners and communities.”
In addition to approving UCEDC, CBAC, and NJCC to participate in the Premier CDFI Program, the NJEDA also approved the three CDFIs for $1.5 million loans through the CDFI Loan to Lenders Program. These loans will support the CDFIs’ efforts to provide low-cost financing to small businesses impacted by COVID-19 and the resulting economic downturn.
“Under the best of circumstances, business owners in underserved communities face challenges accessing capital. COVID-19 has only made that already challenging situation worse. As the pandemic continues, CDFIs are going to play a key role in helping small businesses survive and adapt to the ‘new normal,’” said NJCC President Wayne Meyer. “The NJEDA’s partnership and support will be critical to our efforts to provide the resources businesses need to keep paying their employees and preparing new systems that are sustainable over the long term.”