Authorizes job development authority to create bank export incentive program

Summary of provisions

This legislation permits the Job Development Authority (JDA) to create a program in which monies will be placed with cooperating banking organizations. Such corporations will be permitted to invest these monies on the condition that they lend an amount equal to two times the amount of money provided them to eligible applicants for eligible projects. Eligible applicants is defined as New York State firms with less than 500 workers. Eligible projects means a product manufactured or service delivered by an eligible applicant to a customer residing in or representing a nation other than the united States or its territories. The bill permits JDA to authorize such loans to be between $25,000 and $500,000 and to be at a competitive interest rate under the terms negotiated by the authority with the banking organization involved. The authority is permitted to terminate such agreement 30 days after that banking organization involved has been notified that they have not lived up to the terms of the agreement. Once each fiscal year the authority shall report to the Governor and the fiscal committees of the Legislature as to the number of loans made to eligible projects, the amount of each loan and its repayment terms include interest charged and duration of the loan, the principal product or services involved in the eligible project, the nation in which the product or services was sold, and the number of banking organizations participating in the program.

Justification

Small and medium-sized corporations seeking to export products find it virtually impossible to secure financing when the sale of a product involved is to a foreign customer. The primary reasons that such funds have been unavailable is that the processing of such a loan involved hi~h overhead cost because of the need to evaluate the foreign customer and estimate the fluctuations of foreign currencies and other variables involved in an export sale. These high transaction costs cannot be recovered because the interest rate that must be offered in order for the seller to remain competitive must be relatively low and the terms of the loan are relatively short in duration (one to five years) and the principal amount is also low due to the size of the transaction. Thus, the banking organization finds it impossible to make money offering these "export credits" to small and medium-sized businesses seeking to sell overseas.

This legislation is designed to provide a pool of money which the banking organization can invest as it chooses and use the income from such investment organization to subsidize the cost of small loans to medium and small-sized exporters. The legislation requires that at least two times the amount of money placed with the bank shall be lent out to these small and medium sized firms. While medium-term financing represents only roughly 10% of the export financing needs of corporations in our country, it is the portion of export financing which is being met least well by the banking community. It is the intent of this legislation to use the expertise that resides within the banking community to evaluate the quality of the loans and make the financial judgments about each loan. Such expertise does not, reside within the public sector and would therefore be done in a less efficient manner by a public sector organization. While the end result of this legislation will be to make New York exporters more competitive to the world market, it is necessary to provide such competition through the intermediary of the banking community because of their ability to evaluate the risk.

Legislative history

2007-2008: S.2027 Referred to Commerce, Economic Development and Small Business 2009-2010: S.363 Referred to Commerce, Economic Development and Small Business

Fiscal implications

None.

Effective date

On the one hundred twentieth day after it shall have become a law, with provisions.