New York LDP Program Overview
The Excelsior Linked Deposit Program (LDP) was established on February 11, 1994, and made permanent on March 30, 2001. Recent changes in the program, brought about by the FY 2024 New York State Executive Budget, have significantly expanded its scope. The most notable change is an increase in the lifetime loan limit from $2 million to $6 million, making LDP an even more attractive option for eligible borrowers.
Under the LDP, eligible borrowers can benefit from an interest rate subsidy that can be as much as 2 or 3 percentage points lower than the prevailing rate on commercial loans. New York State (NYS) intervenes by providing a linked deposit of state funds to incentivize lenders to offer borrowers reduced interest rates for the first four years of the loan term. The lender, in turn, pays the state a reduced interest rate on the deposit, and this results in a corresponding reduction in the interest rate charged to the borrower.
Each linked deposit can go up to $4 million, and the lifetime limit for LDP assistance to a single borrower is now $6 million. If a borrower hasn't reached this limit, they can apply for assistance on multiple loans.
It's important to note that the rate reduction is tied to the lender's 4-year certificate of deposit/share certificate rate, which sets the maximum reduction permitted, regardless of the borrower's eligibility under LDP. The actual rate reduction cannot exceed the rate reduction on the certificate of deposit/share certificate with NYS.
The reduced interest rate is guaranteed for a four-year period, and loans with terms shorter than four years are not eligible for the program. For loans with terms exceeding four years, the interest rate for the remaining loan duration will be negotiated between the lender and the borrower. There is also the possibility of obtaining a four-year extension by fulfilling specific conditions.
Lenders are prohibited from charging any additional fees or penalties, including discounts, points, origination fees, handling fees, or service charges, beyond what is typically associated with the type of loan.
The program is administered by the Commissioner of Empire State Development (ESD), who makes all determinations regarding eligible projects and deposits with authorized lenders. Authorized lenders encompass various financial institutions, such as commercial banks, savings banks, savings and loan associations, farm credit institutions, credit unions, and other participating lenders.
The interest rate subsidy varies depending on the type of borrower and project
A 3 percent interest rate reduction through the Excelsior Linked Deposit Program applies to:
- Certified Minority or Women-Owned Businesses/Service-Disabled Veteran-Owned Business Enterprises (for government procurement projects only).
- Businesses with up to one hundred full-time, NYS-based employees that will create or retain full-time permanent jobs in highly distressed areas (retail businesses must demonstrate preservation of existing jobs or an increase in overall retail jobs in the area).
- Agricultural Firms (as defined in subdivision two of section 301 in Ag & Markets Law) with up to five hundred full-time, NYS-based employees undertaking projects to expand or improve agricultural operations and create or retain full-time permanent jobs within NYS.
- Qualifying businesses engaged in specific industries like biotechnology, information & communication technologies, advanced materials and processing technologies, electronic and photonic devices and components, energy efficiency, renewable energy and environmental technologies, or small-scale systems integration and packaging, with up to one hundred full-time, NYS-based employees.
- Defense industry manufacturers (25% of gross revenues derived from defense contracts/subcontracts) aiming to reduce dependence on Department of Defense and other military contracts/subcontracts while diversifying production for other non-military markets.
A 2 percent interest rate reduction through the Excelsior Linked Deposit Program applies to:
- Manufacturing firms with up to five hundred full-time NYS-based employees for eligible projects, including plant and equipment modernization, improvements in production processes and operations, development of new products, and working capital for modernization activities.
- Independently owned and operated service businesses with up to one hundred full-time NYS-based employees, not dominant in their field, and whose projects will result in the retention or creation of permanent private sector jobs within NYS.
However, certain businesses and projects are not eligible for the Excelsior LDP
Ineligible Businesses:
- Personal Service Providers, such as daycares or funeral homes.
- Professional Services, including medical, legal, accounting, engineering, and educational services.
- Retail Services, including restaurants, entertainment venues, grocery stores, and similar establishments.
- Non-Independently Owned Service Businesses, particularly franchise operations.
- Real Estate Developers and Recreational Businesses.
- Not-for-Profits.
- Pre-startup Businesses (those without sales or employment records).
- Companies Headquartered Outside NYS.
- Service Companies with over 100 employees.
- Borrowers Who Have Reached the Lifetime Allowance (though this is less relevant after the cap increase to $6 million).
- Businesses with only 1 Part-Time employee.
Ineligible Projects for the Excelsior LDP:
- Ongoing Construction: Projects where construction began before LDP application approval.
- Existing Financing: When financing was initiated before LDP application approval.
- Completed Projects: Borrowers seeking funds after completing projects before LDP application approval.
- Equipment Purchases: When equipment delivery occurred before LDP application approval.
- Projects Not Enhancing or Expanding Business Operations.
- Eligible Businesses with Ineligible Retail Projects (unless in a highly distressed area).
- Owner Occupancy: Buildings must be mostly owner-occupied.
- Residential Buildings.
- Renewal Applications after Significant Employee and Revenue Decreases.
- Projects Benefitting from Other Interest Rate Reduction Programs.
- Buyouts Involving Non-NYS Residents.
- Variable Rate Loans, Lines of Credit, and Refinancing.
- Investments Not Creating or Retaining at Least 1 Full-Time Equivalent (FTE).
- Loans with Less than a 4-Year Term.
If you are considering applying for a commercial loan, it is advisable to discuss the New York Excelsior Linked Deposit Program with your lender to determine if you are eligible for this interest rate subsidy, which could result in significant interest savings. For any questions about the program, please feel free to seek guidance from our expert, Don Warrant, CPA, at don.warrant@freedmaxick.com. Don is well-versed in the program and can provide you with valuable insights and assistance.