Hochul budget plan would add $440M for low-interest business loans

An additional 6,000 small- and medium-size businesses across the state would receive low-interest bank loans in the next couple of years under an initiative put forward by Gov. Kathy Hochul, her economic development chief said on Monday. 

The initiative in Hochul's proposed 2025-26 state budget would boost funding for the Low Interest Capital program from $560 million to $1 billion, said Hope Knight, CEO of Empire State Development, the state’s primary business-aid agency, which administers the program.

She outlined the increased funding in remarks to local business executives, union leaders, educators and nonprofit leaders at a meeting on the campus of Long Island University in Brookville on Monday. 

Knight explained that the state helps to reduce interest rates on business loans by depositing money with the lender, matching the loan amount that the borrower is to receive. The state accepts a lower return on its deposit, allowing the lender to pass the savings to the borrower. After four years, the lender returns the deposit to the state, she said. 

“With interest rates being as high as they are, we want to be able to provide businesses with the ability to get lower cost capital,” Knight told Newsday after speaking at the Long Island Regional Economic Development Council meeting on Monday. “We’ve seen a significant increase in [the number of loans], so we believe that we need to increase the amount of capital available for the program.” 

She added, “We think we can serve approximately 6,000 small businesses” if the proposed funding increase is adopted by state lawmakers. The state budget is due by April 1.

The loans are available to manufacturers with 500 or fewer employees in the state and service firms with 100 or fewer employees. Applicants must be headquartered in the state and cannot be retailers, professional service firms or provide a personal service, such as childcare and funerals, according to ESD.

To date, the program has resulted in $2 billion in loans to nearly 6,000 small businesses that in turn have invested more than $4 billion in expansion projects, according to data from the state budget division.

Knight said there’s only $7 million left in the program, which used to be called the Linked Deposit Program.  

Linda Armyn, president and CEO of Bethpage Federal Credit Union, said on Monday that the loan program “is definitely beneficial for small businesses, and it helps the lenders as well to make the loans.” She is co-chairwoman of the regional council.

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.