The Kansas Economic Recovery Loan Deposit Program became law in April 2021 as part of SB 15, the Kansas Bankers Association’s push for the Kansas version of Enhancing Credit Opportunities in Rural America (ECORA). The program provides $60 million in idle state funds available for Kansas banks for the purpose of low-interest loans to small commercial or agricultural businesses in Kansas. These idle state funds are under the control of the Office of the State Treasurer and the Pooled Money Investment Board (PMIB). Right now, there is $59 million available and ready to be deployed.
Leonard Wolfe, President and Chairman of United Bank & Trust in Marysville, would encourage Kansas bankers to get involved in the program says, “United Bank & Trust enrolled in this program for the benefit of our community and bank customers. Right now, with interest rates being low and liquidity high, we are not experiencing high demand but fully anticipate more requests in the future as the interest rate environment shifts. Our customers will need it, and we know it works.”
The availability of low-cost credit is vitally important to Kansas businesses, including farmers and ranchers, as shuttered storefronts, a disrupted energy sector, and a slow supply chain have caused a ripple effect that will negatively impact the cash flows of agricultural operators and small businesses for the foreseeable future. The Kansas Economic Recovery Loan Program will promote business growth, stimulate job creation, and incentivize financial institutions to extend credit to small business borrowers. Surrounding states, such as Missouri, Oklahoma and Iowa, have similar programs currently infusing hundreds of millions of dollars into businesses in their respective states.
Kathy Schwerdtfager, EVP/Chief Credit Officer at The Bank of Tescott, sees this program as another way to help your customers and stay competitive, says, “We are excited to partner with the state to be able to offer the program to the small commercial or ag businesses within our communities. We have had a good history of working with the State Treasurer’s office with the Kansas Agricultural Loan Deposit Program and saw this as an opportunity to have another “tool in our toolbox” to assist borrowers in the markets we serve. In addition, the program allows us to be more competitive on interest rates, in a changing interest rate environment.”
Kansas Economic Recovery Loan Deposit Program 101
Can my financial institution participate? The program is open to any bank that agrees to participate and is eligible to be a depository of state funds.
Who is an “eligible borrower”? Any individual or entity operating a business primarily for commercial or agricultural purposes. The business must maintain operations and transact business in Kansas and employ less than 200 full-time employees.
What are the terms of the loan? Loans are limited to $250,000 to be repaid over a period of up to 10 years. Loans are deposited in Kansas financial institutions at 2% below market, or a minimum of .25%, and financial institutions can charge an additional 3% on top of the deposit rate. Only one economic recovery loan deposit can be made and be outstanding at any one time to any eligible borrower. Although you can only do one economic recovery loan, you can still do an additional agricultural loan for the same borrower. The borrower’s rate will be re-calculated annually by the PMIB.
For more information or to sign up for the Kansas Economic Recovery Linked Deposit Loan Program or the Agricultural Loan Deposit Program, go to kansasstatetreasurer.com/fin_serv.html.
Kelly VanZwoll, JD, AVP-Staff Attorney and Government Relations
