Partnering with the EDA

1. Partnering with the EDA Feb. 4th 2010 Program for USHAA – www.ushaa.com

2. Who We Are Independent, self-supporting finance and economic development agency dedicated to offering: • Financing Assistance • Access to Technical Assistance • Real Estate Development Assistance Mission: To broaden New Jersey’s economic base by providing our customers with the necessary financial and technical support to grow businesses, create jobs, and renew communities

3. Who We Are Since 1974, we have provided over $19 billion to 9,600 projects in New Jersey, resulting in the creation of an estimated 288,000 new permanent jobs • Our customers include: • Small- to mid-sized for-profit and nonprofit entities • Technology and life sciences companies • Real estate developers • Municipalities and other government entities • Traditional banks and community lenders

4. Commerce Transition To more efficiently provide assistance to businesses in New Jersey, many of the functions and duties previously belonging to the New Jersey Commerce Commission will now be handled by the EDA. This consolidation will create exciting new opportunities for businesses in New Jersey. • The EDA expands with the addition of a new division engaged in key business assistance, State marketing and international trade • New Jersey’s financing and economic development functions and resources will be delivered and administered exclusively by EDA • With the additional functions and resources, the business community will benefit from a more cohesive experience – “one stop shopping” for all of New Jersey’s financing and incentive programs

5. Key Benefits of Partnering with the EDA When banks partner with the EDA, it is truly a win/win situation: the bank keeps and satisfies the customer, while the customer receives low-cost financing. • Bank • Maintains customer relationship • Mitigates risk through EDA participation and/or guarantee • EDA’s DSCR and LTV requirements are less demanding • 1.10 DSCR • Up to 100% LTV • The EDA takes a subordinated collateral position • Customer • Grows business with low-cost financing

6. EDA Financing Resources Statewide Loan Pool Fast Start for small business Bond Financing Main Street NJ Invest NJ

7. Statewide Loan Pool The EDA participates in bank loans to make the project viable for the bank and affordable for the company. The key benefits are reduced risk and blended interest rate. • Uses: Fixed assets or working capital • Eligibility: Any business that meets the following criteria: • Located in a targeted municipality, or • Operating in a targeted industry, and • Creates one new job for every $50,000 of EDA assistance • Amount of Assistance: • Fixed assets: Up to $1.25 million loan/$1.5 million guarantee: Total of $2.75 million • Working capital: Up to $750,000 loan/$1.5 million guarantee: Total of $2.25 million • Interest Rates: Fixed and variable rates are available • Fixed rate is typically indexed to 5-year Treasury rate, plus 0 to 1.5% depending on a scoring formula, with a current floor of 3% • Variable is indexed to Prime Rate, minus 1 to 4% depending on a scoring formula, with a current floor of 2%

8. Fast Start for small business The Fast Start for small business program offers an expedited approval process on financing for small businesses that have been in business from one to three years. The key benefit is that the EDA provides the financing, while the bank keeps the deposits from the customer. • Uses: Business expenses not related to rent, capital construction, utilities or other indirect costs • Eligibility: • Business must be in operation for at least one year • The EDA places a particular emphasis on creditworthiness, cash flow, and collateral • Amount of Assistance: • Up to $300,000 for credit scores greater than or equal to 700 • Up to $125,000 for credit scores greater than or equal to 650 • Interest Rates: Fixed and variable rates are available • Fixed rate is typically indexed to 5-year Treasury rate, plus 0 to 1.5% depending on a scoring formula, with a current floor of 3% • Variable is indexed to Prime Rate, minus 1 to 4% depending on a scoring formula, with a current floor of 2%

9. Bond Financing • Eligibility: • Tax-exempt bonds are available to manufacturers and nonprofits and for certain exempt facilities. • $20 million capital expenditure limit for manufacturers (3 years back and 3 years forward) • Uses: • Fixed assets, working capital, and refinancing for non-profits • Fixed assets (land/buildings and new equipment) for manufacturers • Amount: • $500,000 with no dollar limit on tax-exempt bonds for nonprofits • $500,000 to $10,000,000 on tax-exempt bonds for manufacturers • Interest Rates: • The bank sets the interest rate, terms and other financial conditions

10. Main Street Assistance Program • $50 million fund deployed to assist eligible businesses • in three ways: • - Loan Participations • *Up to $1 million per total transaction for fixed assets; up to $750,000 for working capital, • with EDA loan participation not to exceed 25% of total transaction • *Fixed 5-percent interest rate • *Collateral subordinate to the bank • *Total EDA exposure can not exceed $2 million or 50% of bank transaction • - Loan Guarantees *Up to $2 million guarantee on a term loan for fixed assets; up to $1.5 million guarantee • on a term loan for working capital (guarantee must be less than 50% of total • transaction) • - Lines of Credit Guarantees • *Up to $250,000 guarantee on a line of credit (guarantee must be less than 50% of total • transaction and is available through EDA’s Preferred Lenders only)

11. Main Street Business Assistance Program Terms/Conditions • 5% fixed interest rate on EDA portion • Maximum term of 5 years; amortizations may be longer • Personal guarantees required for any person or entity with 10% of more ownership in applicant/operating company • 1.1X debt service coverage ratio • Based on 2 most current years of financial statements • Global debt service can be used • DSCR defined as net income plus interest, depreciation & amortization minus owner distributions (plus add back in rent if rent will be replaced by loan payment) divided by principal and interest payments on existing debt plus new debt • Collateral required for all loan participations and guarantees • LTV not to exceed 100%

12. Main Street Assistance Program Eligibility • Business must be located in NJ and in business for at • least 2 years • In good standing with EDA, federal/state agencies and • requesting bank • No bankruptcy within the past 7 years or criminal history • Minimum credit score of 680 for at least one of the • guarantors • Business should maintain jobs in NJ

13. Partnership Success Stories Tony Pallet Egg Harbor Township Ace Hardware McLean Packaging St. Philip’s Academy Jezek Tool and Machine Company

14. Tony Pallet A Newark-based manufacturer and recycler of pallets • $192,942 bank loan with 25% EDA guarantee of $48,235.50 • 5.10% fixed; 5-year term; 10-year amortization • Funding was used to acquire equipment, including a new wood grinder that reduces the cost of scrap wood disposal and a new kiln to treat pallets used in export “The entire process was very smooth and I would definitely do business with the EDA again.” -President Vera Russo

15. Egg Harbor Township Ace Hardware One of five family-owned Ace Hardware retail stores in Atlantic County • $650,000 bank loan with 25% EDA participation of $162,500 and 30% EDA guarantee of $146,250 • Loan terms: floating rate equal to WSJ Prime + 1%; 6-month interest only, followed by 9.5 years of monthly payments plus interest (call option at year 5) • Participation terms: 5.48%; 6-month interest only, followed by 9.5-year amortization, 5-year term • Funding was used for equipment and inventory “The EDA assistance made our expansion work when no banks were willing to work with our whole project. The procedure was no problem thanks to the great staff and the minimal paperwork.” -OwnerJoseph Smith

16. McLean Packaging A Newark-based manufacturer and recycler of pallets • The EDA issued a $10,000,00 tax-exempt bond, which was directly purchased by a bank • Loan terms: variable rate equal to the tax-free equivalent of the 30-day LIBOR plus 150 bps; 20-year term • Funding was used to acquire manufacturing equipment “Working with the EDA was a seamless process, and we would not have made the move into New Jersey without their assistance.” -President Joe Fenkel

17. St. Philip’s Academy A Newark-based nonprofit elementary and middle school in the Episcopal tradition • The EDA issued an $11,285,000 tax-exempt bond, which was directly purchased by an investment corporation • Loan terms: 4.29%; 25 years • Funding was used to acquire, renovate, and expand facilities to accommodate increased enrollment “You could tell that the EDA understood that our business is educating kids. They were there to help us through the whole process and answer any questions we had. It’s safe to say that I would love to continue to work with the EDA.” -Thomas H. Hooper, Director of Institutional Advancement

18. Jezek Tool and Machine Company An Elizabeth-based precision machine shop and manufacturer of precision metal and plastic parts • $550,000 bank loan with a 25% EDA guarantee of $137,500 • 4.75% fixed; 5-year term, 20-year amortization • $255,000 bank with a 25% EDA guarantee of $63,750 • 4.75% fixed; 10-year term, 10-year amortization (call option at end of year 5) • Funding was used for the refinancing of equipment and real estate “Before we refinanced our equipment and facility, we were locked into a loan with a much higher interest rate. My company would not have been able to receive the financing with PNC Bank at that time without the EDA’s assistance.” -Owner Al Muschiatti

19. QUESTIONS? COMMENTS? New Jersey Economic Development Authority 609-777-4898 www.njeda.com For more information about doing business in New Jersey visit www.newjerseybusiness.gov or call 866-534-7789