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State program overhaul to benefit farmers, small business owners

State program overhaul to benefit farmers, small business owners

March 21st, 2018 by Philip Joens in Local News

Missouri State Treasurer Eric Schmitt on Tuesday announced an overhaul to a program that gives small businesses and farmers low-interest loans.

The program allows small-business owners, farmers and property developers discounts of up to 30 percent on loans used to expand their businesses. Schmitt said he hopes the changes will allow small businesses and farms to expand more easily.

Created in 1985, the Missouri Linked Deposits Program makes low-interest loans available to farmers, small-business owners and property developers. The state works with local banks to give loans at below market rates. Borrowers can receive up to a 30 percent interest-rate reduction by using the program.

Previously, borrowers could not use the program more than once after their five-year loans expired. A 2016 report from former state treasurer Clint Zweifel noted this caused use of the program to decline in recent years.

Since he took office last year, Schmitt has solicited feedback from businesses and farmers around the state. He said removing the single-use restriction will help businesses and farm owners in small towns across the state.

"That was probably the most frequent feedback," Schmitt said. "We think it's a huge opportunity."

Other changes will be made, like moving most of the records for the program from paper to digital. Schmitt hopes this change in particular will save taxpayers money. Schmitt also made other minor changes to the eligibility guidelines for farmers.

"Agriculture changed over the past 30 years, and the program hasn't kept up with it," Schmitt said.

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Last year, the Missouri Linked Deposits Program made $720 million available to borrowers. In recent years, though, only about 30 percent of funds available have been lent. Use of the program peaked in 2011, when loans issued totaled $382.6 million and the program saw a 54 percent increase in use, according to a report from former state Treasurer Clint Zweifel.

Since then, use of the program declined as interest rates sank nationwide and mitigated one of the principal reasons for the program's existence. In 2016, loans issued declined by 21 percent from 2015 to $206.9 million.

Rising interest rates and low commodity prices could cause use of the program to grow. The Federal Reserve is expected to raise interest rates today.

Season-average corn price predictions fell by a dime to $3.15-$3.55 per bushel in March, according to the U.S. Department of Agriculture. Estimated soybean price estimates remained unchanged at $9-$9.60 per bushel.

As low commodity prices continue to drag the farm economy along and interest rates rise, Schmitt said, he thinks the number of farmers using the linked deposits program could grow.

In 2016, small businesses made up 77 percent of borrowers who used the program. Agri-businesses made up 12 percent, and developers building multi-family housing projects made up an additional 9 percent of borrowers.

In Jefferson City, banks like Hawthorn Bank, River Region Credit Union, Providence Bank and others participate in the program. Schmitt said only about one-third of banks statewide participate.

"Our biggest challenge is making sure people are aware," he said.

Business leaders praised the plan. In a news release, Missouri Farm Bureau President Blake Hurst said the plan will spur economic development in rural parts of the state.

Matthew Panik, Missouri Chamber of Commerce vice president of governmental affairs, said the program will help businesses by helping them get a low-interest loan.

"I think it just gives them another avenue to inject capital into their business," Panik said.