By STEVE BINDER
Illinois Correspondent

SPRINGFIELD, Ill. — State leaders in Illinois have tweaked a once-popular loan program for farmers, freeing up more money for each borrower and at guaranteed lower interest rates.

Illinois State Treasurer Dan Rutherford announced the changes last week; top Illinois Farm Bureau (IFB) officials pushed for them. One of the key changes lowers the interest rate that the state charges to banks from 2 percent to 1 percent, and caps the maximum rate charged to borrowers at 4.5 percent. In many instances, borrowers were locked in at higher rates.

At the start of his term in January, Rutherford said he reviewed the program – then called “Cultivate Illinois” but since changed to “Ag Invest” – and was surprised to learn of its higher interest rates. He also said the decline in participants in recent years was “dramatic.”

“The interest rates were not competitive in today’s market,” Rutherford said. “We found out that there were excessive amounts of paperwork and bureaucracy involved with participating. We found out that the threshold or the dollars available was relatively modest.”

Statistics from the past four years verify the drop-off in users. In 2007 the program had 11,184 borrowers who were loaned $1.1 billion. In each of the following three years, numbers went from 9,413 borrowers and $970 million in loans; 747 borrowers and $68.8 million; and 381 borrowers and $25.7 million, respectively.

Any Illinois farmer is eligible to participate in the program. With the changes to Ag Invest, individual borrowers can qualify for up to $120,000 instead of $100,000. Each farm can qualify for up to $240,000 rather than $200,000 under the old terms.

Loans of up to $200,000 also can be locked in at 4.5 percent interest rates for five years.

Philip Nelson, president of the IFB, said Rutherford approached them and sought feedback about the old loan program. The changes should prove attractive to farmers, Nelson said, especially those planning large purchases in the near future.

“Farming is a capital-intensive industry and having access to capital is important to farmers,” he said. “This is a positive step the state can take to assist our largest industry (agriculture). And this is going to be a much more customer-friendly approach for the people that utilize this program.”
Skip Bailey and his family used the program three years ago to buy some equipment and to expand their grain operation north of Harrisburg, in southern Illinois. They borrowed $65,000.

“I probably couldn’t have gotten a much better interest rate at the time, and it wasn’t the best time for lenders, but it has worked out great for us,” Bailey said.

Same goes for Brian Carls0n, who recently purchased a farm operation just outside LeRoy in central Illinois. “The main thing was the program just locked us in at a really good interest rate,” he said. “It saved cash flow, is what it did.”
Rutherford said his office will review the program again in about six months to see how well the changes have worked. Farmers interested in more information, and in locating a participating lender, can call the Ag Invest office at 217-557-6436 or go online to www.treasurer.il.gov