States to receive $1.5 billion for small businesses

Owner Ron Ristau (C) speaks to his employees at The Warrior Hut on Main Street in Honey Grove, Texas October 8, 2008.

WASHINGTON (Reuters) - The Treasury Department on Friday announced a $1.5 billion lending initiative to promote small businesses at the state level.

To receive funding, states have to demonstrate that for every dollar the federal government provides, they will generate $10 in new private lending, which will create an impact of $15 billion on the economy, the Treasury said.

Among the six states receiving the biggest allocations, California has the largest at $168.62 million, followed by Florida at $97.66 million. Michigan can receive up to $79.16 million and Illinois up to $78.37 million. Both New York and Ohio will each receive slightly more than $55 million.

The states can use the funds in programs that provide collateral supports for small manufacturers, give a matching contribution to bank loans, or guarantee small business loans.

Treasury noted the loans are not the only new support for small business. The Small Business Jobs Act became law last week, creating a $30 billion small business lending fund for community banks and offering tax cuts for small businesses.

(Reporting by Lisa Lambert; Editing by James Dalgleish)