BILL NUMBER: S6165

SPONSOR: SANDERS
 
TITLE OF BILL:  An act to amend the state finance law, in relation to
the Excelsior Linked Deposit Program

 
PURPOSE OF BILL:

The proposed legislation amends the Excelsior Linked Deposit program to
increase the lifetime cap on the total amount of money a company may
borrow in the program from $2 million to $5 million and to remove the
current $2 million limit on the maximum loan amount a company may
receive under the program.

 
SUMMARY OF PROVISIONS:

Section one of the proposed legislation amends the state finance law to
increase the lifetime cap on the total amount of money a company may
borrow in the program from $2 million to $5 million. It also removes the
current $2 million limit on the maximum loan amount a company may
receive under the program.
              

Section 2 of the proposed legislation provides that it will take effect
immediately upon the effective date of the bill.

 
JUSTIFICATION:

The Linked Deposit Program is experiencing increased activity, which is
associated with rising interest rates. Year to date activity has
increased by 60 percent when comparing 2018 to 2017 activity. In addi-
tion to rising interest rates impacting activity, Empire State Develop-
ment ("ESD") has contributed to the increase as well by actively promot-
ing the program through continued outreach to the banking community,
small businesses and minority and women owned enterprises.

To date, Linked Deposit Program assistance has been provided on three
hundred and thirty-one (331) loans to minority and/or woman owned firms
for a total of $111.28 million, of which six (6) loans have reached
their lifetime maximum. Overall, five thousand six hundred and seventy-
seven (5,677) loans totaling over $1.9 billion have been approved for
assistance, most of those to businesses with one hundred or fewer
employees.

There are currently eighty-eight (88) borrowers that have reached their
lifetime maximum for Linked Deposit assistance. A majority of these
businesses have added employees, which demonstrates the effectiveness of
the program and how it supports the growth of the economy.

Since these businesses are no longer able to utilize the program's
interest rate reduction, they experience increased cost of capital and
will face higher borrowing costs when attempting to expand or improve
their operations. They are being penalized unnecessarily for having
reached their lifetime maximum and through no fault of their own are
paying more to borrow and invest in the growth of their business.

ESD expects these firms would continue to access the program if legally
able to. In addition, ESD has heard from borrowers wishing to have the
cap raised so they could continue to participated in the program and

from lenders stating it would be beneficial to their business if the
lifetime allowance were to be increased.

ESD is confident that an increase to the lifetime maximum would allow
the businesses that have reached the maximum to utilize the program
again and further invest in the improvement and expansion of their busi-
ness.

 
PRIOR LEGISLATIVE HISTORY:

This is a new bill. This bill was previously introduced in 2017 and
introduced as 5.6491 (Young) and A.8117 (Schimminger).

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This bill would take effect immediately.