“Ensuring the success of New Jersey’s businesses is a vital component in building a stronger and fairer New Jersey economy,” said Governor Murphy.
By: Richard L. Smith
New Jersey State Commerce officials have stepped up their efforts to assist entrepreneurs affected by the largest bank failure since the 2008 financial crisis and the second-largest in U.S. history on Friday, March 10th.
Silicon Valley Bank's problems stem from its earlier investment decisions, which were triggered on March 8th, when it announced a $1.75B capital raising campaign. It told investors it needed to plug a hole caused by the sale of its loss-making bond portfolio.
The decision caused many people to pull their money out of the bank. Silicon Valley Bank did not have enough money to pay all the bankers asking for their money back, so they collapsed.
In response to Silicon Valley Bank's (SVB) collapse last week, The Honorable Governor Phil Murphy announced that the New Jersey Economic Development Authority (NJEDA) will be opening and launching a series of programs designed to provide emergency assistance to New Jersey-based companies banked by SVB.
According to Reuters, after a dramatic weekend of banking circumstances at Silicon Valley Bank, U.S. regulators said the failed bank's customers would have access to all their deposits starting Monday and set up a new facility to give banks access to emergency funds.
The Federal Reserve also made it easier for banks to borrow from it in emergencies.
“Entrepreneurial businesses are critical to our state’s overall economy. The suite of programs announced today will connect them with the working capital they need to keep their operations running and will keep our innovation economy moving forward.” -NJEDA Chief Economic Transformation Officer Kathleen Coviello.
New Jersey's assistance package includes re-opening the NJEDA's Entrepreneur Support Program, launching the NJEDA's Angel Match Program, and scheduling a special board meeting to consider an emergency liquidity facility.
Governor Murphy said all programs would provide necessary financial support for companies experiencing liquidity challenges due to the SVB collapse. They are designed to help companies meet payroll, pay rent, and continue their day-to-day operations.
According to Governor Murphy, both programs will open on the NJEDA's website early this week, with Angel Match launching on Monday, March 13th, with pre-qualifications opening at 9:00 am and the Entrepreneur Support Program launching on Wednesday, March 15th.
"Now, more than ever, it is essential that our state supports companies that contribute to our economy, innovation ecosystem, and the dynamism of our cities. By offering a suite of programs for New Jersey entrepreneurs impacted by the SVB collapse, we will continue to keep residents employed and support companies that are vital to our innovation ecosystem."
"Under Governor Murphy's leadership, New Jersey has made monumental strides in growing our innovation economy and scaling companies of the future," said NJEDA Chief Executive Officer Tim Sullivan.
"Sunday's announcement serves as a testament to New Jersey's commitment to the success of our entrepreneurial sector, with the state pivoting almost overnight to launch programs that provide the critically necessary support for entrepreneurs during economic uncertainty."
Funded at $5 million, the New Jersey Entrepreneur Support Program, NJ commerce officials said the package offers a guarantee to support repayment of an investor loan advanced for working capital purposes and is designed to encourage investors to support businesses within their portfolios during this liquidity crisis when investor support is particularly crucial.
It provides an NJEDA guarantee of up to 80 percent for an eligible new loan or convertible note by a qualified investor into a New Jersey-qualified business, not to exceed a $200,000 guarantee per company.
Funded at $20 million, Governor Murphy said the Angel Match Program would help early-stage businesses bridge funding gaps as they scale their operations and refine their products. The program, which will match up to $500,000 in direct investments, is designed to fuel the growth of early-stage companies while increasing the pool of available capital, stimulating further investments into New Jersey's innovation ecosystem.
The funding may be used for product development, marketing, research and development, and other working capital needs. This will extend the capital support from investors during this time of uncertain banking resources.
NJEDA's Chief Economic Transformation Officer states that the board will consider creating a $10 million emergency liquidity facility to review financial support requests for New Jersey-based companies with over $250,000 in deposits at SVB.
This product is anticipated to support impacted companies with a loan of up to $500,000 to provide short-term financing options for at most 12 months. The Authority's board will consider the program approval at a board meeting scheduled in the coming week. Further details will be announced before the board meeting.
"During this challenging time, we remain committed to ensuring that investment dollars continue to flow to New Jersey's emerging technology and life sciences companies," said NJEDA Chief Economic Transformation Officer Kathleen Coviello.
