The Perfect Financing Solution for Small Borrowers

The Trust administers a loan directly from its own funds, eliminating the need for small borrowers to go through the Bonding Process. Direct Loans save small borrowers monies normally spent on financing costs such as rating agency fees, arbitrage responsibilities, underwriters discount and bond insurance.

Direct Loans are available to borrowers who are eligible for hardship assistance or determined not to be eligible for leveraged loans. This includes borrowers who are determined by the Trust to be non-investment grade or who have submitted small loan requests.

The following criteria apply to the NJEIT Direct Loan Program:

• Total project costs can not exceed $150,000.
• Eligible projects must be listed on the Federal Project Priority List
• A Direct Loan may be executed if the Project Sponsor is subject to economic hardship and/or lacks administrative staff and/or expertise.
• For projects less than $70,000, the Trust can loan the entire amount, eliminating further costs and borrower concerns.
• Under the Direct Loan Program the Trust staff performs the Financial Review, and directs all disbursements and collection of funds.

Loan Terms
Direct Loans can be financed up to 20 years, although a borrower may elect a shorter repayment term. Loan terms for equipment purchases are limited by the estimated useful life of the equipment according to current accounting standards.

The Trust Loans
Historically, half of each project's estimated allowable costs are funded with a loan from the Trust. The Trust loan is structured to allow for composite level debt service after the project construction period. In the case of private drinking water systems, loans will be secured by collateral, which may include letters of credit, water system mortgages and/or guaranties of owners or operators or any other collateral that the Trust may deem appropriate. The interest rate on the Trust loans is determined through a complex formula utilizing the Municipal Market Advisors MMD Index and the Trust's most recent bond rate.

The Fund Loans
The Fund Loans are issued at a zero interest rate. Participants repay the principal on their Fund Loans coincident with the initiation of debt service payments on the Trust Loans.

Repaying The Loans
Participants make scheduled debt service payments on both of their loans with a single payment to the Trust. Payments are required to begin by the first year of the loans. Each debt service payment is determined as follows:

Collateral for Small Borrowers
For some of the smaller borrowers, additional security in the form of a borrower financed two-year reserve fund may be required. This fund will be held by the Trustee in the case of a bond financed Trust loan or by the Trust in the case of a direct loan. Drawdowns on the loan may also be restricted to the percentage of the fund-up of the special borrower financed reserve fund.

Program Requirements
Direct loans are administered under the same requirements as the the Trust's traditional loan program. While these loans do not have to follow the same yearly schedule, many of the same program requirements may apply, depending on the purpose of the loan.

Direct Loan Application Form (PDF format)

If you would like to learn more about Direct Loans, send us an email or call (609) 219-8600.