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Beyond the PPP: Alternative Funding Options to Consider

By JOHN BLAKE, CPA

June 1, 2021

The light at the end of the tunnel is shining brighter for many New Jersey and Pennsylvania-area individuals and families. The distribution of the vaccine combined with reductions in COVID-19 cases has resulted in the rollback of government orders. As the end of the pandemic appears to be drawing closer, the unfortunate reality is that many businesses are still struggling to recover.

When it was announced that the Paycheck Protection Program (PPP) ran out of money, it surprised many. The PPP is one of the most popular COVID relief options offered by the Small Business Administration (SBA), in part, due to the opportunity for complete loan forgiveness. Since it is unclear whether Congress will allocate additional funding, many businesses are now evaluating other options to meet financing needs.

Federal SBA Programs

  • Shuttered Venue Operators Grant (SVOG) – This grant program is designed to help live venues, theatres, museums, cinemas, and other performing arts businesses. Eligible applicants can qualify for grants equal to 45% of gross earned revenue with a maximum of $10M. The funding may be used for payroll costs, rent, utilities, mortgage payments, independent contractor costs, state and local taxes, insurance payments, and related advertising expenses. Since the SVOG is a grant and not a loan, recipients are not required to pay back awarded amounts.
  • Economic Injury Disaster Loans (EIDL) – This long-term loan program was expanded at the onset of the pandemic to help businesses access a source of low-cost capital. Applicants can receive any amount equal to 24 months of economic injury with a maximum of $500,000. Unlike the PPP, there is a collateral requirement for loans exceeding $25,000 and a personal guarantee requirement for loans greater than $200,000. It is a 30-year loan with no pre-payment penalties or fees, a fixed 3.75% interest rate for businesses, and 2.75% for nonprofits.
  • Debt Relief Assistance (Microloans) – The SBA also offers debt relief assistance for borrowers with 7(a), 504, and Microloans (EIDLs are excluded) in regular service status. This includes payment of six months of principal, interest, and any associated borrower fees. Unlike other SBA programs, borrowers do not need to apply to receive assistance. The SBA will make payments starting on the next loan payment due date for loans not currently on deferment. For those in deferral, the SBA will begin making payments when the deferral period ends.

New Jersey Business Relief Programs

There are various relief options available to New Jersey businesses made available through the NJ Economic Recovery Act of 2020. A summary is outlined below.

  • Main Street Recovery FundThe program is designed to assist New Jersey small businesses, including minority certified and women-owned micro-businesses. Only those with less than $1M in annual revenue (according to the most recent tax return) and less than ten full-time employees are eligible. The amount of the award will be determined during the regulatory process. Awards may be used for either capital improvements or to meet operating costs. When used for capital improvements, projects must comply with prevailing wage rates and green building manual requirements.
  • Aspire Program – This financing tool supports commercial, mixed-use, and residential real estate projects. To qualify, a project must demonstrate without the incentive award, the project would not be feasible, show a financing gap issue exists, be located within a designated “Incentive Area,” and include a developer who has an equity participation rate of at least 20%. The maximum award amount is limited to 45% of development costs and 50% of development costs for commercial projects in targeted areas.
  • NJEDA Small Business Emergency Assistance Grant Program – The New Jersey Economic Development Authority (NJEDA) has reopened pre-registration for Phase 4 of its Small Business Emergency Assistance Grant Program. Pre-registration opened on May 26, 2021, and closes on June 30, 2021. Phase 4 is intended to help bars and restaurants, micro-businesses, child care providers, and other small businesses and nonprofits with up to 50 full-time equivalent employees with grants as high as $20,000, depending on the type of business. Pre-registration is not first-come, first-served, but companies are encouraged to begin the process as early as possible.

Pennsylvania Business Relief Programs

  • Community Development Block Grants – This program provides grants to eligible municipalities undertaking community development activities. Award amounts can be used on housing rehabilitation, public services, community facilities, infrastructure improvements, development, and planning. The grants have a minimum request amount of $100,000 and have no maximum. There are various program terms, but the most important is the requirement that funds be used for activities that benefit low- and moderate-income individuals and families.
  • PIDA Low-Interest Loans – The Pennsylvania Industrial Development Authority (PIDA) offers low-interest loans and lines of credit for qualifying businesses that create and retain full-time jobs for the development of industrial parks. Loans must be used on land and building acquisitions, construction, renovation, equipment purchase costs for qualifying projects. Interest rates are based on current market conditions. The loan term is up to 15 years for land acquisition and construction, ten years for machinery and equipment purchases, and one year for working capital and lines of credit.

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While the Paycheck Protection Program is currently no longer available, it does not mean that businesses are without options. If you have questions about the information outlined above or need assistance with an accounting or tax issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.

©2021 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.

About the Author

John focuses on helping with the tax needs of real estate, technology and manufacturing, distribution, and wholesale companies. He works with management and business owners to review their business plan, tax planning process, identify additional saving opportunities, and ensure compliance and reporting deadlines are met. Also, John helps educate clients about the new opportunities available...

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