May 26, 2020 | By Patrick T. McCloskey
On May 22, 2020 Governor Andrew Cuomo announced the New York Forward Loan Fund (NYFLF), a new loan program aimed at supporting small businesses, nonprofits and landlords as they reopen during the wind-down of New York’s Covid-19 PAUSE order.1
Under the NYFLF, qualified borrowers can receive unsecured working capital loans of up to $100,0002 at an annual interest rate of 3% (2% for nonprofits). Unlike the Small Business Administration’s (SBA’s) Paycheck Protection Program (PPP), the loans are not forgivable, but rather payable over a five-year term with interest-only payments due during the first year.
To qualify as a small business under the NYFLF, the applicant must have annual revenues of less than $3 million and 20 or fewer full-time equivalent (FTE) employees.3 In addition, NYFLF borrowers must have (i) been in business for at least one year and (ii) “suffered a direct economic hardship” from Covid-19 social distancing policies and stay-at-home orders “that have materially impacted their operations.”4
NYFLF borrowers must be headquartered or have their main office in New York State and the loan proceeds must be used to support New York State operations only.
In addition, the NYFLF is not available to any business that received a PPP loan or an SBA Economic Injury Disaster Loan (EIDL) due to Covid-19.5
Loans under the NYFLF will be made through five local Community Development Financial Institution (CDFI) lenders. Given the limited initial program funding of $100 million and expected high demand, the business type, geography and industry may factor into which applicants receive NYFLF loans.
According to the presentation of the ESD’s Division of Small Business and Technology Development, 65% of the NYFLF is reserved for small businesses, 30% is reserved for small landlords and 5% is reserved for nonprofits, while at least 60% of the loans will be made to minority or women owned businesses. In addition, the “geographic proportionality goals” of the NYFLF prospectively allocate 30% of the loan funds to New York City, 18% to Long Island and 12% to the Hudson Valley.
Pre-applications for the NYFLF opened at 12:00 pm (EDT) on Tuesday, May 26, 2020. The applications will be made on a rolling basis (as opposed to the first-come, first served structure of the PPP), with priority given to industries and regions that have reopened. Small businesses and nonprofits that have not yet reopened are still encouraged to prepare a pre-application in advance. The published FAQs include separate embedded links to the pre-applications for small businesses, nonprofits and landlords, as well as a list of resources for assistance and a link to contact the NYFLF with questions.
Online pre-applications must be submitted by the business owner with the largest ownership interest, but any owner with a greater than 20% interest is required to attest to the information submitted. For nonprofits, the online pre-application should be submitted by a member of the executive team. Once the pre-applications are submitted online, applicants that are deemed eligible will be matched with a participating CDFI lender that will review the request and contact the applicant to start the full loan application.
The information required for the pre-application varies among small businesses, nonprofits and landlords, but a detailed list of requirements for each category can be accessed here. The presentation of the ESD’s Division of Small Business and Technology Development includes a series of questions for the NYFLF application.
This blog post is for general informational purposes only and does not constitute legal advice. No one should rely on the information in this blog post without seeking appropriate legal, accounting, tax or other appropriate advice from an attorney, accountant or other professional properly licensed in the applicable jurisdiction(s).
1All information contained herein is based on (i) the Empire State Development Corporation’s (ESD’s) NYFLF information page, (ii) the ESD’s NYFLF slide presentation; (iii) the published FAQs; and (iv) the NYFLF’s pre-application page.
2The amount of a NYFLF loan for small businesses and nonprofits is the lesser of (i) $100,000 and (ii) the revenue (for nonprofits, expenses) during any consecutive 3-month period in 2019 or the first three months of 2020. For landlords, the amount of a NYFLF loan is the lesser of (x) $100,000 and (y) the projected reduction in 3-months’ net operating income, calculated based on actual lost income during April 2020 or May 2020. Sample calculations of the loan amount can be accessed here.
3For a nonprofit, the annual $3 million limit applies to its operating budget, rather than revenue. For landlords, there must be no more than 200 units under ownership and no single property can be greater than 50 units. In addition, a landlord’s properties must either (i) be located in a low or moderate income (LMI) census tract or (ii) meet a test where property rents are affordable to tenants of low and moderate income.
4A complete list of NYFLF qualifications for small businesses, nonprofits and landlords is available here.
5The following types of businesses are also not eligible: corporate-owned franchises, not-for-profit social clubs, branch banks, pay day loan stores, pawn shops, astrology, palm reading, liquor stores, night clubs, adult bookstores, massage parlors, strip clubs, track waging facilities, trailer-storage yards, and marijuana dispensaries.