Springfield – The Illinois State Treasurer’s Office announced it is increasing to $500 million the amount of money available to small businesses for low-interest bridge loans to help employers navigate the COVID-19 pandemic.
Illinois State Treasurer Michael Frerichs made the decision because nearly all of the initial $250 million he made available in March has already been committed to financial institutions throughout the state.
Frerichs has the sole authority to make the money available through the linked deposit program, which has been a core function of the Illinois Treasurer’s Office since 1983.
“People are hurting and they need help now,” Frerichs said.
The initial announcement was praised by industry leaders, including the Community Bankers Association, as well as some Democrats and Republicans in the Illinois General Assembly.
“We can move faster than the federal government because we already have the authority to facilitate the loans,” Frerichs said.
“We need to push this money into the hands of small business owners because we know that it is easier to ramp-up a business that is struggling than a business that has shuttered.”
The loans work like this: The state treasurer’s office takes $500 million of its $13 billion investment portfolio and makes it available to community lending institutions, such as local banks and credit unions.
In turn, the lending institutions agree to loan the money to small businesses at below-market rates. The financial institutions determine eligibility and loan terms.
In one month, the state treasurer’s office committed $220 million to 27 banks and credit unions.
These linked-deposit loans have been a state treasury staple for decades. The most widely known is Ag Invest, which helps farmers with annual and long-term loans to be used for operating costs, equipment purchases, livestock purchases, and construction-related expenses. Established in 1983, Ag Invest has provided more than $4 billion in loans.