TRENTON – Legislation sponsored by Senate President Steve Sweeney (D-Gloucester, Cumberland, Salem) that would provide incentives for banks to give loans to minority owned and small businesses cleared the Senate Budget and Appropriations Committee today.
“Our small businesses want to expand and hire individuals, but they simply do not have the capital to do so,” said Sweeney. “This program is a great way to give banks an incentive to extend loans to our small businesses at affordable rates. By providing these low cost loans, we can give small businesses the means to provide jobs for our fellow New Jerseyans.”
The bill, S-3081, would establish the “Minority and Small Business Linked-Deposit Program. The state Treasurer would be authorized to place state funds on deposit with a bank at rates 3 percent below the interest rate for a two-year certificate of deposit (CD). The bank would then make a loan equal to the amount deposited by the Treasurer to an eligible small (less than 100 full-time employees) or minority owned business at a rate 3 percent below the standard loan rate offered by the bank. The linked deposit relating to the loan would remain on deposit with the bank for a period of not more than two years.
New York began a similar program in 1993. Their program permits loans of up to $1 million over a four-year period. Although market interest rates are at historically low levels, the program continues to be a success. In 2010, New York’s linked deposit program experienced a 14 percent increase in application volume, an 18 percent increase in the number of projects approved, and a 32.5% increase in the total amount of deposits. The Empire State Development Corporation, a New York State independent authority, indicates that the program generated $168 million last year in new private sector development.
The legislation now heads to the full Senate.