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A loan together: NJEDA, banks fill big need of small businesses

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Lucy Garcia, left, Arturo Beristain, Adagio Teas CEO Michael Cramer and Gregory Hijuitl.
Lucy Garcia, left, Arturo Beristain, Adagio Teas CEO Michael Cramer and Gregory Hijuitl. - ()

Michael Cramer, CEO of Adagio Teas in Elmwood Park, had a challenge many entrepreneurs would love: His company was growing, and he needed capital to keep up with demand and expand.

Thanks to the New Jersey Economic Development Authority’s Small Business Fund, Cramer was able to move his gourmet tea company from his mother’s basement to a state-of-the-art facility in Bergen County.

Adagio Teas received an M&T Bank loan that included 50 percent NJEDA participation through the Small Business Fund. With the influx of capital, Adagio purchased necessary equipment to ramp up manufacturing and increased its workforce by about 20 percent since securing the loan in 2014.

“With the support of M&T Bank and the EDA, we will be able to continue our growth and focus on providing our customers with the best quality teas and products,” Cramer said. “Small and medium-sized business need all the help they can get. Programs like the Small Business Fund are a boon for the businesses of New Jersey.”

The NJEDA’s Small Business Fund offers creditworthy small, minority-owned or women-owned businesses assistance of up to $500,000. The program also features an expedited approval process and fixed interest rates.

To qualify for a Small Business Fund loan, most companies must have been in operation for at least a full year. Further, applicants have been unable to obtain financing from banks. For non-profit corporations, businesses must have been in operation for three full years.

“Sometimes, a company might be too small to obtain a bank loan; if a bank is not able to get to a positive credit decision, they would look for credit enhancement,” said Lori Matheus, senior vice president of finance and development at NJEDA. “At the EDA, through the Small Business Fund, we can provide that so the money can flow to the company.”

Additionally, some companies lack relationships with banks at first. The NJEDA is able to provide direct loans in these cases.

Matheus said the NJEDA’s role in enabling the success of SMBs is to be creative consultants. As such, it offers a wide array of financing assistance programs for small- and mid-sized businesses includes direct loans, bank participations and guarantees, and tax-exempt bonds for manufacturers and not-for-profit organizations.

Matheus said $576 million in financing was made available to more than 145 businesses through traditional lending programs for small- to mid-sized businesses and manufacturers in 2017.

“Not all programs work for all companies, which is why the NJEDA believes it’s important to have a collection of financing tools in the toolbox,” Matheus said.

Elias Rosas blending tea at Adagio Teas.
Elias Rosas blending tea at Adagio Teas.

“When we get a call or meet with businesses, the value add is helping them figure out what they need financially,” she said. “Sometimes they will benefit from the Small Business Fund, other times a company with a larger need fits into one of our other programs.”

The NJEDA works with 26 banks through its premier lending program. It is able to introduce a company to a New Jersey banker and help them build a relationship. “We can help them through the application process or we can work directly with their bank.”

Companies who have attempted to get traditional bank loans often come to the NJEDA because the authority’s loan terms are “less stringent” than most banks, Matheus added.

“A lot of our lending is done in conjunction with banks,” she said. “We do it in the form of participation. The EDA purchases a portion of a bank loan, reducing the outstanding the credit exposure for the bank.”

When the NJEDA participates in the loan – as with Adagio Teas – the business makes a payment to the bank and the bank remits the funds back to the NJEDA. In a direct loan scenario, the NJEDA loans the money to the borrower and the company pays it back directly — no bank involved. The NJEDA also can guarantee a traditional bank loan, when necessary.

To apply for a loan from the Small Business Fund, companies must submit a $300 non-refundable application fee. If approved for the loan, there is a commitment fee of .05 percent of the loan amount and a closing fee of the same.

Applicants for Small Business Fund loans file online and must provide a Tax Clearance Certificate from the Division of Taxation.

A small business’s growing pains often stretch beyond money, Matheus noted. That’s why the NJEDA works closely with the Business Action Center in the New Jersey Secretary of State’s office.

“While my office focuses on financing, an entrepreneur’s questions often begin much earlier in the conversation,” she said. “For example, maybe they are looking for a building. The Business Action Center can help them find a place and then we can help with financing.”

The NJEDA also has a strong partnership with the UCEDC, a statewide organization that provides technical assistance to SMBs.

“If companies aren’t ready for our lending programs, we refer to them to the UCEDC so they can get focused and be more strategic about growing their businesses,” Matheus said.

Some entrepreneurs come to the NJEDA in the earliest of planning stages — some just have an idea and need a business plan – and those companies aren’t yet ready to apply for loans through the Small Business Fund, Matheus said. But empowering them to get on the path they need to pursue puts them closer to their goals.

“We are trying to help provide companies with access to capital, but our goal is to strengthen business,” she said. “So it’s important to connect them with resources they may not be aware of in the state and then help them obtain the capital necessary to grow.”

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