Understanding the Linked Deposit Program—A Catalyst for Small Business Growth in New York

A Catalyst for Small Business Growth in New York

In an effort to boost the economic vitality of New York State, the Linked Deposit Program (LDP) plays a pivotal role by supporting small businesses and minority and women-owned business enterprises (MWBEs). This program is designed to lower the cost of borrowing for these entities, facilitating investments that enhance their productivity, performance, and competitiveness. Here's everything you need to know about how the program works, who it benefits, and why it's so important.

What is the Linked Deposit Program?

The LDP is an economic development initiative that offers reduced interest rates on commercial loans for eligible small businesses and MWBEs within New York State. By offering interest rates up to 2 or 3 percentage points lower than the prevailing rates, the LDP makes borrowing more affordable for businesses committed to improving their operations. Participating financial institutions include commercial banks, savings banks, savings and loan associations, farm credit institutions, credit unions, and Pursuit Lending.

Why Was the Linked Deposit Program Created?

Small businesses and MWBEs often encounter significant challenges in accessing traditional financing, which can impede their ability to expand and innovate. The LDP addresses this gap by reducing the cost of capital, thus enabling these businesses to undertake projects that are crucial for their growth and for accessing new markets. This not only strengthens the businesses themselves but also contributes to the overall economic health and job creation in New York State.

Who and What Qualifies for the LDP?

Eligibility for the LDP is broad, encompassing manufacturing firms with 500 or fewer employees and service businesses that are independently owned, operate with 100 or fewer employees, and are not dominant in their field. The program supports a variety of projects including:

• Modernization of equipment
• Expansion of facilities
• Introduction of new technologies
• Development and marketing of new products
• Strategic initiatives for entering new markets

However, businesses such as daycares, funeral homes, and retail services, generally do not qualify unless they are located in highly distressed areas and meet specific employment criteria.

Application Process and Benefits

To apply for the LDP, businesses must approach a participating lender, who will handle the application process and forward it to the Empire State Development (ESD) for approval. The process is designed to be streamlined, with decisions typically made within 5 business days.

The benefit to the borrower is significant: not only does the reduced interest rate make loans more manageable, but the savings can be reinvested into the business to fuel further growth. For lenders, the program offers an opportunity to support local businesses at minimal cost, serving as an effective marketing tool and potentially attracting new customers.

Impact and Longevity of the Program

Since its inception on February 11, 1994, the LDP has been a critical tool in supporting the state's economic development. The program has evolved to ensure it remains responsive to the needs of New York’s diverse business community. As of 2001, the program was made permanent, underscoring its importance and success in fostering a robust business environment.

For further details or to start an application, businesses and lenders can contact the Empire State Development’s Linked Deposit Program Office or visit their website. This program represents a proactive approach to economic growth, focusing on empowering businesses that are foundational to the economic landscape of New York State.

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