Linked Deposit Remains a Viable Option for Business in Uncertain Times

By Assemblyman Will Barclay

Each day, for the past several weeks, has brought drastic changes to the Dow and the financial markets on Wall Street.  Our economy is in a financial crisis, with no signs of stabilizing anytime soon.  Though the Federal government has tried to stem the flow of a recession, it’s not clear what our future holds.

As a result, most people are in a holding pattern.  Home buyers, home sellers, car buyers, investors and businesses are waiting to see how and when everything will settle.  Meanwhile, for those who were considering making an investment in their business, loans are more difficult than ever to come by as banks are being more selective about to whom they will lend.  Though the state is also in uncertain economic times, the Economic State Development agency has been able to maintain its Linked Deposit Program.  Under the program, eligible businesses can obtain loans from commercial banks, savings banks and savings and loan associations, as well as farm credit institutions and the New York Business Development Corporation at an interest rate that is 2 or 3 percentage points lower than the prevailing rate on such loans.  This, in short, makes borrowing less expensive.

The program was created in 1993 to encourage and assist New York businesses to undertake investments that improve performance and competitiveness, which ideally, leads to a stronger economy.  Since the program’s inception in 1994, it has funded 3,119 projects for a total of $1.1 billion, leveraging over $2.3 billion in new capital investment by businesses in New York State.

The odds of approval are high for business. In 2006, 589 applications were processed and 499 were approved for deposits of about $142 million.  It is estimated the approved projects will generate about $300 million in private sector capital investment.  Eligibility is determined based on three major criteria: i) the significance of the project in improving the competitive position and profitability of eligible businesses; ii) the need for a reduced cost of borrowing to enable the borrower to undertake the eligible project; iii) the number of jobs likely to be created or retained in New York State or other substantial economic benefits achieved as a result of the linked loan.

I support the Linked Deposit Program.  It gives businesses the edge they need to be competitive, and helps retain jobs and provides an advantage for disadvantaged businesses. It also directly benefits our area.  In 2006, 46 projects were funded in the Central New York region. Further, the state does not make or guarantee the loan.  The lender will make the credit decision and the loan and be responsible for servicing it.    To apply, companies can contact our office for a brochure or call the Central New York Empire State Development office at 315-425-9110 for more information.

If you have any questions, comments or concerns regarding this or any other state matter.  I can be reached by mail at 200 North Second Street, Fulton, 13069, by e-mail at [email protected], or by phone at (315) 598-5185.