Investment firm Monroe Capital LLC said on Monday it plans to launch a fresh fund of up to $1 billion to provide loans for smaller auto suppliers as the industry shifts from gasoline-powered to electric vehicles.

The White House said the fund would "facilitate access to lower cost capital for small- and medium-sized auto manufacturers to refinance, grow, and diversify their businesses" and noted that more than 250,000 people across the United States work for small- and medium-sized auto suppliers.

The Drive Forward Fund LP is expected to be backed by low-cost government-guaranteed lending through a U.S. Small Business Administration license for the fund.

Also Monday, the U.S. Treasury Department announced a $9.1 million grant to launch the Michigan Auto Supplier Transition Program to help smaller firms secure financing for EV components' production.

New U.S. government tariffs on Chinese EVs and on batteries, components and critical minerals along with restrictive EV tax credit rules are prodding automakers to shift their supply chains. Automakers face stringent new emissions rules that are also pushing them to build cleaner vehicles requiring new parts.

"We believe this new Drive Forward Fund will be critical to catalyzing growth and innovation within America's automotive supply chain," Monroe CEO Ted Koenig said.

Chicago-based Monroe said unlike larger manufacturers, small- and medium-sized auto suppliers often lack access to finances, hindering their ability to expand to produce parts for EVs.

The fund, which will be advised by an auto industry council, intends to begin fundraising after completing the SBA Small Business Investment Company licensing process, Monroe said.

Alliance for Automotive Innovation CEO John Bozzella, who heads the trade association representing General Motors, Toyota Motor, Volkswagen and other automakers, said the fund would help ensure smaller suppliers can access private money to modernize.

A successful EV transformation "requires a cutting-edge automotive supply chain that keeps the country competitive and underpins our economic and national security," Bozzella said.

In July, the Energy Department said it planned to award GM and Chrysler-parent Stellantis nearly $1.1 billion in grants to convert existing plants to build electric vehicles and components and last week announced $3 billion for battery manufacturing sector grants for 25 projects.

U.S. Vice President Kamala Harris in May announced the administration would dedicate more than $100 million for small- and medium-sized auto parts manufacturers to expand or retool.