Notes from the Funding Desk: Use Loans to PPP Eligible Borrowers to Access Community Advances with All-in Rates Below 0%

On June 16, we were thrilled to announce increased access to Community Advances for Paycheck Protection program (PPP) eligible borrowers to help support members’ community lending to small businesses and economic development projects.

The recent rate sheet from July 16, 2020, shows our Community Advance rate, which appears below. As you can see, the dividend benefit further reduces member's Community Advance rates by approximately 21 basis points making the 1 Month rate negative and the 3 Month rate 0%.


Take a 3-Month Advance and Lock-in 0% All-in Funding to Maximize Returns

Members anticipating near term loan forgiveness granted by the Small Business Administration (SBA) can fund the short term asset with a 3-month advance at approximately 0% when taking into account the benefit of the dividend paid on activity stock. The below example assumes a $1,000,000 PPP Loan receiving 1% annualized interest, and a 3% administration fee for loans between $350,000 and $2,000,000 paid by the SBA.


Lock-in Subsidized 5-Year Funding at a Steep Discount to Brokered Funds

Underlying loans supporting the Community Development Advance are required to receive access to the subsidized funding on the execution date only. However, Community Advances can use any collateral value pledged to FHLBank Chicago and can be used to fund any asset on your balance sheet. This is a great opportunity to lock in discounted funding for the long term. The below table shows that when including the dividend benefit, the 5-year community advance has a 39 basis point discount compared to brokered deposits of the same term.


What Are the Program Parameters?

  • Member’s borrower must be PPP-eligible; the underlying loan is not required to be for PPP.
  • Members will certify as to the PPP eligibility of their borrower; additional documentation will not be required to support eligibility.
  • Applications relying on borrowers’ PPP eligibility to qualify for the Community Development Advance will be accepted through December 23, 2020.
  • The underlying borrower’s loan must be funded by the member no later than December 23, 2020 and must be less than 90 days old at the time of the member’s advance draw. The member must draw the advance no later than December 31, 2020.
  • The existing per-member Community Advances Program limit applies: Maximum advance amount is the greater of $250M or 10% of the member’s non-Community Advance portfolio.
  • Members may submit a portfolio of loans to PPP-eligible entities to be funded under a single Community Development Advance.

How to Participate

Members interested in participating must complete the Community Development Advance application. If members have questions regarding the program or application, please reach out to your Sales Director or Community Investment at

Contact your Sales Director for more information.

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