States Expand Low-Interest Loan Programs for Farms, Businesses, and New Housing

Manuel Simonis
Published Apr 26, 2024

 

States across the United States are experiencing a surge in public interest in their low-interest loan programs, as businesses and individuals seek financial relief from high interest rates.

These little-known state-funded programs are designed to spur private investment by offering borrowers bargain-priced loans.

One example of this increased demand is seen in Missouri, where within just six hours of accepting applications for $120 million in state-subsidized, low-interest loans, Missouri Treasurer Vivek Malek had to stop accepting new applications due to overwhelming demand. "The demand is huge, and it is real," said Malek.

This increase in interest can be attributed to a series of key interest rate hikes by the Federal Reserve that have made all loans more expensive.

To combat inflation, the Fed raised its benchmark interest rate to a two-decade high, making it more challenging for farmers, small businesses, and individuals to secure affordable loans.

Enter the linked-deposit programs. Under these programs, states deposit money in banks at below-market interest rates. The banks then leverage these funds to provide short-term, low-interest loans to specific borrowers, such as those in agriculture or small business.

By reducing interest rates by an average of 2-3 percentage points, these programs can save borrowers thousands of dollars.

Many states have built up large surpluses from pandemic-era revenues, giving them the ability to deposit more money in banks for discounted rates.

As a result, interest in these programs has skyrocketed, leading some states to consider reviving programs that were previously shelved during low-interest rate periods.


Illinois, for example, has nearly $950 million of deposits linked to low-interest loans for farmers, businesses, and individuals, up substantially from previous years. It has raised the program's overall cap from $1 billion to $1.5 billion to accommodate the rising demand.

New York's program has also experienced an explosion of applicants. With 317 applications linked to over $220 million of loans in the last year alone, the state's economic development agency is thrilled with the positive response.

This growth in small businesses, even during high-interest rate environments, is made possible by the linked-deposit program.

In Montana, a shortage of affordable housing prompted lawmakers to authorize a new program. Within just two months of launching, the program received $77 million of applications and had to close applications sooner than expected.

Despite the self-imposed cap, Republican state Representative Mike Hopkins praised the program's success in addressing the state's affordable housing crisis.

Other states such as Iowa, Kansas, Ohio, and Oklahoma have also reported increased demand for their linked-deposit programs.

As interest rates continue to climb, these low-interest loan programs offer a glimmer of hope for businesses and individuals struggling to cope with rising costs. The positive response from borrowers demonstrates the importance and impact of these state-funded initiatives.

To accompany these initiatives, you can also reach out to other assistance like the National Debt Relief and seek out extra income opportunities like paid clinical trials.

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