NY JDA Direct Loan Program

What is it?
The New York Job Development Authority (JDA) is a public benefit corporation of the State of New York. The JDA lends funds to local development companies such as the Greater Syracuse Business Development Corporation (GSBDC) for relending to eligible business concerns located in, or locating in, the State. The direct loan program provides 90% project cost financing for expanding businesses, which create or retain jobs.

Eligible Projects
The acquisition of land, buildings, machinery and equipment, building expansion and new construction are eligible.

Eligible Businesses
Most creditworthy businesses are eligible, with the exception of retail establishments, hotels and apartment buildings.

Loan Limits
Loans are normally limited to 40% of the project cost. A JDA loan cannot be subordinate behind more than 50% of the project cost. A 10% equity injection is required. A typical project consists of a financial institution lending 50% in a first mortgage position, JDA through the GSBDC providing 40% in a second or co-equal lien position and the business concern or principals injecting 10% as equity.

Real estate: 10 to 20 years
Machinery and equipment: 5 to 7 years

The JDA loan is usually for the same term as the participating conventional loan.

Interest Rate
The interest rate to the borrower is determined by the type of project. Funds are derived from either the sale of tax-exempt bonds, which results in a below-market rate, or from the sale of taxable bonds, which results in a market rate. Funds are available on either a fixed or variable rate basis.

Lien Position
Normally, a JDA loan is secured by a second lien on real estate. On machinery and equipment, a co-equal lien with the participating financial institution is required. Personal guarantees and key person life insurance is required.

Most JDA loans have no prepayment penalty.

JDA charges total fees of 2% of the JDA loan amount. This consists of a $250 non-refundable application fee and the balance is payable upon JDA commitment. Closing costs are included in the 2% fee.

Application Process

  1. The business decides to expand via real estate and/or machinery and equipment acquisition.
  2. The business concern contacts the GSBDC and/or Empire State Development to outline the project and determine eligibility. An invitation letter is issued by Empire State Development.
  3. The GSBDC provides a list of required information and necessary forms to complete the application process.
  4. After the application is prepared (including bank commitment), the GSBDC Loan Committee reviews it as soon as possible, with principals present. If everything is satisfactory, the Loan Committee recommends approval to the GSBDC Board of Directors within days. Upon Board approval, an executed application is submitted to the JDA. All requests are reviewed by the JDA Board of Directors. These meetings normally take place on the third Thursday of each month. After JDA Board approval, costs can be incurred and a project begun, if ready. PACB approval is also required.
  5. A loan authorization is issued by JDA covering all terms and conditions of the loan. This is then executed by the business concern and the GSBDC.
  6. The project is then started and financed on an interim basis. After completion, a closing is scheduled and the permanent mortgage provided.

Seller-financed mortgages are allowed if subordinate to the GSBDC/JDA loan.

A combination JDA/Industrial Development Bond project is allowed.

If tax exempt funds are used, an amount equal to 15% of the JDA loan proceeds must be used for eligible constructive rehabilitation costs if the project is for the purchase of an existing building.

For tax-exempt funds, no portion of the project may be leased to an unrelated party.