Treasurer Steven Grossman slots $100 million for Massachusetts community banks to lend to small businesses

Grossman was in Springfield to promote his “Small Business Partnership,” which takes state funds that had been invested outside the state and loans it to community banks.

SPRINGFIELD – State Treasurer Steven Grossman hopes to have at least $100 million in state in the hands of community bankers around the state and available for small business lending by Memorial Day.

“Then by the fourth of July, we’ll hopefully be ready for the second $100 million,” Grossman said Thursday after meeting with local mayors, bankers and representatives of chambers of commerce at Springfield City Hall.

Grossman was in town to promote his “Small Business Partnership.” The program takes state funds that had been invested outside the state, or in some cases outside the United States, and loans it in $5 million increments to community banks around the state for two years. The banks pay the state an interest rate that will fluctuate, but is about 0.27 percent now.

“Why should we have our capital working outside our state,” said William J. Wagner, President and CEO of Chicopee Savings Bank in a telephone interview. “Especially when it isn’t earning anything anyway?”

Chicopee Savings, which made about $106 million in commercial loans last year, will participate in the program. Businesses are borrowing to buy buildings they have rented for a long time, open new locations and upgrade equipment.

Grossman said the state will require banks to loan that money to small businesses at discounted interest rates with a focus on lending in the state’s older “Gateway Cities” like Springfield and Holyoke and in lending to minority-owned businesses. “This is about how we ignite the optimism that has always existed in Springfield, in Hampden County and in the Pioneer Valley,” Grossman said. In Holyoke, Grossman discussed the program with Mayor Elaine A. Pluta and Assistant Vice President David J. Thibault of PeoplesBank, of Holyoke, in her office at City Hall.

“It went great,” Pluta said. “He’s right. Small business is the backbone of our city, and any city.”

Pluta later came up with the promotional idea of having businesses to which PeoplesBank gave loans post a sign that reads, “PeoplesBank helped us become a business.”

“I’m happy that he has this initiative,” Pluta said of Grossman.

Grossman talked about how his own immigrant grandfather used $3,000 in credit from U.S. Envelope in Springfield to start his family’s business in 1910. Now called Grossman Marketing Group, the Somerville-based company is run by Grossman’s sons.

“I believe that immigrant entrepreneurship will be the story of Massachusetts in the next 10 years,” he said.

Carlos Gonzalez, president and CEO of the Massachusetts Latino Chamber of Commerce said the program is an invitation to minority business owners to seek out capital through banks.

“That welcome hasn’t always been felt,” he said.

But Joseph G. Traczynski, senior vice president and senior loan officer at Florence Savings Bank, said demand for business loans is slow. Companies are paying down debt and are waiting for the economy to improve before they will borrow more money. Florence is considering taking $5 million, though.

Grossman said banks are getting the state funds cheaper than they would be able to get capital elsewhere. So he expects them to lend it at attractive rates. He’s also hoping to get some promotion muscle behind the programs so businesses get off the fence and borrow.

“I can’t repeal the business cycle,” Grossman said.

Staff Reporter Mike Plaisance contributed to this story.