In recent communications to the southern Illinois communities and counties that have for several decades managed revolving loan funds, the Illinois Department of Commerce and Economic Opportunity has ordered the recall and closure of these locally-managed programs. Champion Community Investments, the regional nonprofit that provides federally-sourced small business loan programs, is seeking additional loan capital as demand for its services is likely to increase in 2018 and beyond.
The closure and return of the local revolving loan funds results from a 2013 HUD Monitoring Finding concerning the use of the RLF’s in Illinois and two other states. In an October 16, 2017 letter to those communities that maintain funds, DCEO said that its best course of action in response to the HUD finding was to close out the RLF programs in their entirety.
Champion Community Investments has been making loans to southern Illinois small businesses since 2006. With other 120 loans closed since that time and over $7.5 million in principal lent, CCI staff and directors anticipate that communities that are losing their revolving loan funds will direct interested parties to CCI. To prepare for that anticipated increase in demand, CCI has already submitted $1.5 million in additional capital requests to the United States Department of Agriculture.
The City of Carbondale is a good example of a community with an active revolving loan fund that will soon be closed out. Steven Mitchell serves as the Economic Development Director for the City of Carbondale and a member of the CCI Board of Directors. He anticipates that Carbondale will return well over $500,000 by the end of January, pending the resolution of negotiations with ILDCEO.
According to Mitchell, current loan holders won’t see any changes in the terms of their loans, except that payments will be made to a third-party provider to be designated by ILDCEO instead of the City of Carbondale. Mitchell said the city’s plan after the closure is clear. “We will direct future loan inquiries to Champion Community Investments for gap and participation financing with local banks. CCI has been extraordinarily adept in managing their loan portfolio and arriving at creative capital solutions to complicated loan scenarios.”
Mitchell also said the return of the RLF funds isn’t a total loss. “DCEO says once the loan fund is returned we can expect to receive two non-competitive grants back from the state totaling the amount that was returned,” he said. “Although we are still considering the most effective uses for the funds, program guidelines generally allow us to use the grant for public infrastructure, housing rehabilitation projects, and economic development projects.”
Rex Duncan is the executive director of Champion Community Investments and a founder of the organization dating back to 2002. He is also familiar with the revolving loan fund programs from his prior years as Du Quoin’s city clerk, budget director, finance commissioner, and mayor. “We anticipate that several million dollars in loan funds will be lost to the region as a result of these closures,” Duncan said. “We also anticipate that quite a few affected communities will turn to CCI as a replacement for those funds.”
CCI has deployed nearly $5 million in USDA and Treasury lending capital, primarily in Jackson, Perry, Williamson, Franklin, and Jefferson Counties. Using a USDA program called Rural Microenterprise Assistance Program, or RMAP, CCI also lends to very small businesses in Randolph, Hamilton, White, Saline, Gallatin, Pope, and Hardin Counties.
As capital is depleted through loan-making, CCI staff and directors must reapply to USDA for supplemental funds in order maintain enough capital to lend. Duncan said that normally CCI would like to keep about 80-85% of its available capital deployed, the remainder being held to satisfy future small business needs. He said that as the demand for loans has increased, CCI’s deployment rate now exceeds 90%.
Duncan is very complimentary of USDA Rural Development staff, both locally and at the state level. “USDA has been great to work with over the years on this. We couldn’t have asked for a better partner,” Duncan said. “I don’t want to count our chickens before they hatch and take their decision-making for granted, but I’m reasonably confident that USDA will be there for us now and in the years ahead.”
For more information about Champion Community Investments, visit their website at www.ccinvestments.org or call Rex Duncan at (618) 713-6320.