The Murphy administration is shifting more focus to small-business programs through the Economic Development Authority — a major change for an agency that has primarily catered to big corporations in the past.
The Trenton-based EDA in recent weeks has launched a new, dedicated unit that is working only with New Jersey-based small businesses in the state, providing them with technical and financial support, among other services.
The EDA also recently created a $15-million loan program geared specifically toward small businesses and made changes to other EDA lending program rules that will benefit small companies.
The EDA’s new emphasis on small businesses and entrepreneurs comes just weeks after Gov. Phil Murphy, a first-term Democrat, put forward a broad economic vision for the state that called for a more targeted approach and a renewed push to boost growth in traditionally underserved communities. Since the rollout of his plan, the Murphy administration has launched the new small-business initiatives far more quickly than some of the higher-profile elements of the governor’s economic plan — including an ambitious proposal to create a public-private venture-capital fund — since they haven’t required the adoption of any new legislation. The effort has won some early praise from industry groups that work closely with small businesses across New Jersey.
As a gubernatorial candidate last year, Murphy, a former Goldman Sachs executive, stressed the need to do more to improve the state economy, citing a state unemployment rate that was persistently higher than the national jobless average. That trend has continued during the first year of Murphy’s tenure; the state’s unemployment rate was 4.1 percent in October, a 17-year low but still higher than the national unemployment rate of 3.7 percent.
Critical of lucrative deals for big corporations
Murphy’s economic platform included a call to make state-administered economic-development programs more beneficial for small businesses and those based in urban communities. He also criticized the ramp-up in lucrative tax incentives awarded to big corporations that occurred during the tenure of former Republican Gov. Chris Christie, suggesting his predecessor’s approach did not provide taxpayers with a good enough return on their investments. For example, more than $5 billion in tax incentives were approved since 2013, after Christie and Democratic legislative leaders made a number of changes to the economic-development programs that had been in place during the Great Recession.
Awarded through the EDA, many of the lucrative tax incentives were provided to big companies like JPMorgan Chase and to Honeywell, a firm that recently announced it would be moving its headquarters to North Carolina. Honeywell received a $40-million tax incentive from the EDA to keep jobs in New Jersey during Christie’s tenure, and the company will reportedly leave enough employees here to continue to qualify for the tax break.
Under Murphy’s economic vision, the EDA is now being used to provide more state help for small businesses. That effort includes the launching of the dedicated unit focused on providing the state’s small-business community with more direct support services. They include technical and financial assistance and help with workforce issues, officials said.
The unit is being led by Christina Fuentes, the EDA’s senior business and community development officer. A new position of small-business liaison has also been created to improve direct outreach to the small-business community, including businesses located in historically underserved communities and those run by women, minorities and veterans, officials said.
When announcing the new unit last month, EDA chief executive Tim Sullivan said it would “allow us to meaningfully engage with a broader group of stakeholders, and provide a dedicated resource entirely focused on creating new economic opportunities and strengthening communities.”
Improving access to capital
Meanwhile, the agency’s new small-business loan program is trying to improve access to capital for small companies, officials said. Seeded with $15 million, that program will provide $10 million in loan guarantees, with a maximum of $1.5 million per borrowing relationship. Another $5 million will be made available for direct loans, with a maximum of $500,000 for fixed assets and $250,000 for working capital.
The agency started taking applications for the loan program, which is called Access, last month, and officials said their goal is to give small businesses more flexibility by putting more emphasis on cashflow instead of hard collateral.
“Across New Jersey, too many small businesses — particularly businesses owned by women, minorities and veterans — struggle to access the capital they need to grow and thrive,” Sullivan said.
The EDA also made changes last month to some of its existing loan programs, including expanding the allowable loan term and amortization for small businesses from 10 years to 30 years. The agency will also be allowed to provide small businesses with fixed interest rates for up to 30 years.
Industry groups are still sifting through all the details of Murphy’s broader economic plan and remain concerned about a proposal to hike the minimum wage to $15. But the new emphasis on small businesses, including by tweaking EDA programs or launching news ones, is being welcomed.
“Anything out there that can help small businesses get the resources they need or help them operate successfully is a good thing,” said Andrew Musick, vice president of taxation and economic development for the New Jersey Business & Industry Association.