senate Bill S363

Authorizes job development authority to create bank export incentive program

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 07 / Jan / 2009
    • REFERRED TO COMMERCE, ECONOMIC DEVELOPMENT AND SMALL BUSINESS
  • 06 / Jan / 2010
    • REFERRED TO COMMERCE, ECONOMIC DEVELOPMENT AND SMALL BUSINESS

Summary

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Bill Details

See Assembly Version of this Bill:
A4881
Versions:
S363
Legislative Cycle:
2009-2010
Current Committee:
Senate Commerce, Economic Development And Small Business
Law Section:
Economic Development Law

Sponsor Memo

BILL NUMBER: S363

TITLE OF BILL :
An act to amend the economic development law and the public
authorities law, in relation to authorizing the job development
authority to create and administer the bank export incentive program
with the technical assistance of the department of economic
development


PURPOSE :
To encourage banking organizations to provide medium term loans at
competitive interest rates for relatively small amounts of money
borrowed for short periods of time.

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
high 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
2003-2004: S.1201 Referred to Commerce, Economic Development and Small
Business
2001-2002: S.519 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.
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