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New Jersey may be one of the smallest states in size, but its population density soars near the top of the list. In 2017, New Jersey boasted the second-highest population density and the 11th highest population – which means that there are a ton of small business owners in this state.
The total number of small businesses in New Jersey is a whopping 820,303. Small businesses employ just over half of the private workforce in the state, and also account for 92.1 percent of the region’s exports, according to the U.S. Small Business Administration (SBA).
But, just like in any other U.S. state, starting a small business in New Jersey is not cheap. For those of us with dreams of opening up our own family restaurant or small-time tech startup, there is a major obstacle that needs to be tackled before our small-business goals can even become a remote possibility: getting the upfront funds needed in order to get the ball rolling.
Small business startup costs vary a lot, depending on the industry and location in which your future small business will operate, and they can make peoples’ goals unachievable. A lot of hopeful soon-to-be small business owners don’t have access to the amount of liquid capital they would need in order to kick off their venture, but – fortunately – they can find help for that.
They can turn to small business financing, and apply for loans, grants, or seek outside investors or donors to help them reach their startup costs – like venture capital firms or even family and friends.
In order to nurture and encourage such a crucial part of its economy, the state of New Jersey helps its small business owners a lot. They offer a lot of resources, including general and specialized business assistance, training services, tax credits, and – most importantly – small business financing programs, too.
Let’s go over some of the small business financing options available to New Jerseyans.
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Small Business Loans in New Jersey
There are several regional and national banks that provide small business loans to residents of New Jersey. Moreover, there is a select group of banks that have been designated as preferred lenders by the SBA – which means that they can approve small business loans with more flexible features in a short amount of time. SBA preferred lenders can also approve loans much faster than if a non-SBA preferred bank is used, as those approvals can take up to four weeks.
Here are three SBA preferred lenders that operate in New Jersey and offer different types of flexible loans to small businesses.
This bank covers 11 counties in New Jersey with 42 branch locations. It offers a commercial line of credit from $50,000 to $20 million, with a variable rate, and terms up to three years. Small businesses may qualify for a line of credit up to $1 million. It also offers commercial term loans, commercial real estate loans, SBA loans, and Express Small Business Loans of up to $100,000.
With several locations throughout the state, Unity Bank offers commercial mortgages, commercial term loans, lines of credit, and construction loans. It’s also an SBA preferred lender, offering 7(a), which can be helpful for startups, and 504 loans. Business loan applications must be mailed, faxed, or submitted in person to a branch.
This nonprofit development corporation offers a 3% Working Capital Loan of up to $25,000 for most business purposes, at a 3% fixed rate for five years. Microloans of up to $50,000 at a six-year repayment term are available, with a 10 percent down payment. And the organization also offers SBA Community Advantage 7(a) Loans and SBA 504 Commercial Real Estate and Major Equipment Loans. You can submit a pre-qualification application online.
There are a number of SBA-backed lenders in that work with small businesses in New Jersey, as well as other private lenders that typically offer higher interest rates and more rigid eligibility requirements. Make sure that you do your research and understand every single fee involved, that your small business is eligible, and that there aren’t alternative lenders who can give you a better deal.
For certain portions of the small business owner population, there is additional help available – like the New Jersey Economic Development Authority, which has a Small Business Fund that provides eligible minority-owned or women-owned small businesses with fixed-rate loans.
Small Business Grants in New Jersey
Just like when you are applying for financial aid when you want to go to college, there is a way to get free money to help open a small business. Unlike loans, you don’t have to pay back small business grants – but you will certainly need to put in a lot of time searching around for the right grants you may be eligible for and putting together the necessary requirements for the application.
Grants can be given to small businesses from both private organizations and federal, state, county, or local governments. Many have very specific requirements, like a certain number of employees or a particular industry.
Here are some small business grants that can be given to firms in New Jersey.
FedEx’s Small Business Grant
Shipping company FedEx offers for-profit businesses with less than 100 employees that have been in business for at least six months an opportunity to get one of its yearly grants. One winner gets $25,000; one winner gets $15,000; and eight winners get $7,500. The deadline for 2018 was in March, so start planning ahead for the year ahead. The competition is stiff – there were 7,800 applicants in 2018.
National Association of the Self Employed (NASE)
Only NASE members are allowed to apply for this grant, which is worth $4,000 and offered to a new small business every single month.
Eileen Fisher Women-Owned Business Grant Program
This clothing brand offers as many as 10 small businesses with grants of at least $10,000 every year. Revenues cannot exceed $1 million, and the companies need to be in operation for at least three years and at least 51 percent women-run organizations in order to be eligible. The deadline is end of May, annually.
There are grants that are offered by the government, but they often have very specific, niche eligibility requirements – like working in healthcare innovation, which is required for the Small Business Innovation Research (SBIR) grant.
Do a lot of research based on your own profile as a business owner – are you a minority, a veteran, or do you work in a niche industry? Try different searches and different combinations based on what type of business operator you are and what kind of firm you are running.
Small Business Investors in New Jersey
When it comes to getting funding for a small business, outside investors play a huge part in launching startups all over the world. For small businesses that have a lot of potential, wealthy investors are willing to put their own money on the line to help a venture succeed. Not all business owners will be able to impress an investor or group of investors enough to seal the deal, but it’s certainly worth a shot to check out some of the investors in your area.
Here are some different types of small business investors that fund ventures in New Jersey:
New Jersey Economic Development Authority
The NJEDA works with venture capital firms by committing tens of millions of dollars that go toward businesses in the fields of emerging technology and life sciences. Venture capital firms invest about six times the amount that NJEDA contributes, which has gone to many local startups.
JumpStart NJ Angel Network
This is a group of angel investors that works with startups across the mid-Atlantic region, and has been in operation since 2002 – when it was started with the support of New Jersey Technology Council (NJTC) and New Jersey Economic Development Authority (EDA). There are multiple angels in the organization, and they primarily invest in technology companies.
Tri State Ventures
This group of accredited investors matches its selection of high net-worth individuals with high-potential early-stage businesses – seed-stage funding. Tri State Ventures typically helps arrange investments in the range of $50,000 to $5 million in these sectors: healthcare (drugs, medical devices, diagnostics), energy, consumer products, and information technology products and services (wireless, photonics, communications).
Getting Your Business Ready for Financing
In order to make a strong case for grants, loans, or courting potential investors, it is best to be as prepared as possible before even starting to seek out these types of funding. Before you even start thinking about it, you need to ask yourself these questions:
- Is now the right time to seek financing?
- Do I have enough time to do thorough research to find the best source of financing?
- Do I know what kind of financing my small business is eligible for?
- Is my small business set up so that repaying a loan is feasible given my business plan?
If the time is right for your small business, it is extremely helpful to have these prepared:
- An in-depth business plan with realistic and well-thought-out projections for the future. The business plan needs to show potential investors, lenders, and grant providers that you know what you’re doing, you know your goals, and how your business will reach them.
- A detailed plan of how you intend on using the funds from the loan, grant, or outside investment.
- Necessary small business loan documents: business and personal tax returns, business and personal bank statements, business financial statements, and business legal documents.
Check each individual lender or investor’s requirements before reaching out and have everything ready to go. Some lenders (mostly private banks) will require some sort of collateral or minimum credit score – so do your research to make sure you even qualify.
Moreover, demonstrate that you know your stuff. It’s important to show that you take your small business’ success seriously, and that you have a clear vision of the road ahead.
What Kind of Financing Do You Need?
Small businesses in New Jersey have numerous financing options, which is why you need to take the time and ensure that you’re making the right choice for your business. The first step is to find out what free financial assistance your small business is eligible for, then submit applications for those – giving you access to free funding early on.
Remember that some grants have requirements that last long after the money has been given, so double-check that you are up for whatever commitments a small business grant requires you to make.
After sourcing as much money as you can from grants, and potentially friend and family contributions, you should then explore your loan and investor options. If your business can realistically handle paying back a loan, then check out the different small business loans available to your type of business. If your small business has enough promise to realistically attract an investor, then start getting yourself ready for investor presentations.
Interested in taking out a personal loan to bootstrap your business? Our guide to personal loans in New Jersey reviews your options.
Author: Jeff Gitlen