Credit unions in New York state are now authorized to participate in its Excelsior Linked Deposit Program.
Gov. Kathy Hochul signed the legislation on Oct. 24.
The program allows businesses to take on commercial loans at an interest rate of 2 to 3% lower than the prevailing rate. Borrowing becomes less expensive for the small businesses, and lenders are compensated for providing the low-rate loans with a comparably reduced deposit of state funds.
Through the program, the state places a deposit for the same amount as the loan taken out, and earns less interest on that deposit. The lending institution then transfers the interest rate savings to the borrower.
The program was originally created as an economic development initiative to encourage small businesses to take on new projects and make new investments in their businesses.
By adding credit unions, the state intends to broaden access to even more small businesses, especially in communities underserved by commercial banks.
“For far too long too many places in NYS were banking deserts, longing for proper attention to help them grow,” said Sen. James Sanders Jr. “By signing this bill, the Governor is unleashing the power of credit unions to aid the unbanked. Thank you Governor Hochul for signing this bill which supports worthy but unbanked communities.”
Manufacturing firms with 500 or fewer full-time New York state-based employees, or any independently owned and operated service business with 100 or fewer full-time New York state-based employees that is not dominant in its field is eligible for a 2% interest rate subsidy through the program, along with any firm with 100 or fewer full time employees based in New York state undertaking a project designed to increase its export activities.
Businesses that qualify for a 3% interest rate subsidy through the program include those with 100 or fewer full-time employees in an Empire Zone or Highly Distressed Area, certified minority or women-owned businesses, defense industry manufacturers, agricultural firms with 500 or fewer full-time employees and technology or innovation businesses with 100 or fewer full-time employees based in New York.
