SPRINGFIELD — Businesses tangled up in Illinois’ infamous $4.8 billion backlog of overdue bills are getting a lifeline tossed to them from the private sector.

By Andrew Thomason

SPRINGFIELD — Businesses tangled up in Illinois’ infamous $4.8 billion backlog of overdue bills are getting a lifeline tossed to them from the private sector.

For taxpayers, the Vendor Payment Program, or VPP, is a wash.

The VPP started in full swing last month and allows investors to take ownership of debt the state owes vendors.

The vendors get 90 percent of what the state owes them immediately from the investor.

In turn, the investor pays the state the remaining 10 percent, which is put into an escrow account. Once the state pays the investor in full, the money in the account is released. For every month the state is late in paying off the debt to the investor, the investor earns 1 percent interest on that debt.

“The state’s innovative VPP program was designed to offer more immediate assistance with cash flow for vendors experiencing significantly delayed payments, at no additional cost to the state,” said Alka Nayyar, spokeswoman for the Illinois Department of Central Management Services, which oversees the VPP.

Most of the state’s bills are about a month behind, but some date back to the spring.

Most overdue bills bought by investors would only draw 1 percent or 2 percent returns, though some could cost the state as much as 5 percent returns.

“This is interest that would have been paid regardless,” Nayyar said.

To date, overdue bills owed to businesses ranging from food providers to eyeglass manufacturers totaling $419,262.76 have been picked up by Vendor Assistance Program LLC, or VAP.

VAP was started by Dustin Mauldin, who also started the payday loan company, AmeriCash Loans, according to businesses records kept by the Illinois Secretary of State.

While Illinois Statehouse News’ multiple messages for Mauldin were not returned, an employee of VAP did respond.

“The reality is that companies that do this type of business don’t want to operate on these types of margin,” Brian Hynes, VAP manager, said. “We realize the (return) margins are small, but if we can do this at a good volume, it can be a business.”

Vermilion Valley Produce provides produce to the Danville Correctional Center and had overdue bills dating back to the spring. It has gotten an influx of about $30,000 from VAP.

“I will say that the program has worked to our expectations thus far,” John Rollins, owner of Vermillion Valley Produce, said. “We limit our exposure to the state because of (its) poor practices.”

Rollins said that despite his positive experience so far with VPP, he is reluctant to do business with the state.

“The state still lags behind (in paying bills), even with this program, and that affects how often we bid and how much we bid,” he said.

So far, Hynes said, VAP has bought debt of vendors facing layoffs or threatening to stop doing business with the state, but VAP can handle as many overdue bills as the state can offer.

“Right now, there’s a bottleneck of $4 billion flowing into the state’s (economy). If we’re able to open up that bottleneck so that more money is flowing to those vendors, the benefits to the economy would be astronomical,” Hynes said.

Illinois is the only state that operates a program like VPP; however, Hynes said VAP has reached out to other states, nine of whom have shown interest.

Bill Smith is the editor and publisher of Evanston Now.

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