Lower Interest Rate Extended for State Loan Programs
The Corbett administration is sweetening the pot for a bit longer for businesses applying to participate in certain state loan initiatives.
A three-month pilot program offering a lower interest rate is being extended for applications submitted through June. The lower rate was inspired by a recommendation from a governor-appointed commission tasked with finding ways to spur investment in the manufacturing sector and support efforts to retain and create jobs.
It’ll be in effect for four loan programs that extend funding for things like equipment purchases and retrofits to improve energy efficiency.
The reduced rate does come at some cost, but only to the number of applicants the programs can accept.
“It lowers capacity a bit,” said Steve Kratz, spokesman for the state Department of Community and Economic Development. “But that’s why we’re closely evaluating it to make sure that we’re not jeopardizing the programs, that they can handle the reduction in interest rates. And thus far, they can.”
The extended interest rate will be 1.5 percent, down from 2.75 percent, for the Small Business First program, the Machinery and Equipment Loan Fund, the Pollution Prevention Assistance Program and the Export Financing Program.
A fifth program, the Pennsylvania Industrial Development Authority, will stop applying the lower interest rate because it receives plenty of interested applicants already without the deal.
Kratz said it’s possible the lower rate will be extended again past June, but for now the administration is waiting to see how many applications each program receives.
“They are revolving loan programs and we need to continue to evaluate program capacity, effectiveness, so we don’t want to lock ourselves in to extending them for too long,” he said.
Early indicators suggest the lowered rate caused an uptick in interest. The Small Business First program received 37 applications in the roughly three-month pilot period. It received 38 applications in all of 2012.
“Had the interest rates not been reduced, it’s hard to tell whether the projects would have moved forward or not," Kratz said.