Are you interested in improving your company’s competitiveness, modernize your equipment or develop new products – but aren’t quite sure how to fund your expansion? The Linked Deposit Program (LDP) may just be the best-kept secret that you’ve been waiting for. Read on to learn more about how this economic development initiative can be a game-changer for your business this year and help you and your team to undertake exciting projects that will improve your company’s productivity, performance, and competitiveness.
What is the LDP?
The Linked Deposit Program (LDP) helps existing New York State firms obtain reduced-rate financing so they can undertake investments to make borrowing less expensive. Eligible businesses can obtain loans from commercial banks, savings banks, savings and loan associations, farm credit institutions, and the New York Business Development Corporation. Ultimately, the program helps the State to improve business competitiveness, create new jobs, generate overall economic growth, and build opportunities for disadvantaged businesses. Under LDP, eligible businesses can obtain commercial loans at an interest rate that is up to 2 or 3 percentage points lower than the prevailing rate on such loans, making borrowing less expensive.
Why was the LDP created?
In 1994, the State began the LDP to assist and encourage firms, manufacturers, and small businesses to make investments. The economy of New York State, and the nation, is undergoing fundamental change. International competition has dramatically intensified with the adoption of advanced technologies and modern production methods. In many ways, this technological renaissance is eroding the competitive position of NYS manufacturers and other businesses in the global economy, threatening profitability, employment and prospects. Economic change has had a particularly detrimental effect on minority and women-owned businesses, which are generally smaller, younger, and less well-capitalized than other businesses. All this is occurring at a time when small businesses are facing a serious shortage of bank credit, impeding their ability to take on projects to modernize their operations, improve their competitiveness, access new markets, and increase their export trade activities. In 2001, legislation was enacted to lift the sunset date and make the LDP a permanent program.
Eligible Borrowers:
- Manufacturing Firms – with 500 or fewer full-time NYS-based employees
- Service Businesses – independently owned and operated and not dominant in their field, with 100 or fewer full-time NYS-based employees
To review the extensive list of qualifying projects which may make your company LDP eligible, click here.
How does an applicant apply for an LDP, and how long before an applicant hears back?
The applicant (borrower) must apply for the loan to a participating lender, and the lender will complete and send the LDP application to the Linked Deposit Program Office of Empire State Development (ESD). The application will be approved or rejected within 28 days. (The average LDP approval time is 5 business days.) Keep in mind that the most common problems the Office of ESD encounters with applications are insufficient/incomplete information, no statement of how the project will improve the borrower’s competitiveness, an inadequate “impede” statement, or a missing NYS-45 form.
What lenders (banks) can participate in the LDP?
Commercial banks, savings banks, savings and loan associations, and farm credit institutions that are, or are qualified to become, approved depositories for NYS linked deposit funds. The New York Business Development Corporation (NYBDC) is also an approved lender. Lenders are compensated with a deposit of State funds at comparably reduced rates. LDP currently has 70 participating lenders you can review on ESD’s website, here.
Is there a maximum amount that may be borrowed under the program?
Yes. A borrower’s lifetime maximum is $2 million (including prior deposits). Every single deposit is limited to $2 million, and companies can have multiple deposits totaling up to $2 million outstanding at any time. There is no minimum loan amount.
A vibrant business sector is essential to create economic growth and generate jobs. A 2017 report for the governor and the Legislature showed assistance from the LDP created 253 jobs in 2016 and would retain an additional 268 through at least 2021. Since the program’s inception in 1994, LDP has lowered the interest rate for over 5,680 loans, resulting in $1.93 billion in bank lending and leveraging $4.03 billion in new capital investment by businesses across New York State (as of 2018 data). It is our hope that by sharing this important program with our clients and manufacturing industry professionals, New York’s businesses and the health of New York’s export trade will grow in a positive direction. For more information and instructions on applying, click here. To connect with one of our Manufacturing Service Group Team Members, please schedule an appointment through our website.
Sources: ESD, Assemblyman Will Barclay