Reading-based Boscov's filed for Chapter 11 protection in August and announced that it would close 10 of its 49 stores. In Pennsylvania, it operates 24 stores and employs more than 5,000 people.
"We took this step because of the extraordinary reach that Boscov's has in Pennsylvania," Rendell said during a news conference.
Company officials did not immediately return a telephone call seeking comment Thursday.
Under the federal loan program, local governments can guarantee loans for economic development projects with federal community development block grants.
Any Boscov's real estate and inventory that is free of liens would serve as collateral for the loans, and the administration believes the value of those assets is sufficient to cover any remaining debt if the chain should default, Rendell said.
But even in a worst-case scenario, the loans carry a low risk because the state has a $24 million surplus in unspent grant money, Rendell said. The state receives anywhere from $9 million to $13 million annually in community development block grants.
If the state were responsible for repaying any of the debt, it would forgo at least a portion of its grant money from HUD, Rendell said.
Boscov's will not have access to the federal loans if it is unable to secure bridge loans that are part of more than $300 million in financing the chain will need to exit bankruptcy, Rendell said.
The company is seeking a Delaware bankruptcy court's approval of a deal that would allow the firm to be bought by the families of Albert Boscov and Edwin Lakin. Boscov is the privately held company's former chairman and son of the company's founder. Lakin is a former president and co-owner, and the founder's son-in-law.
A final sale order remains pending; another court hearing is scheduled for Friday.
Boscov is also a prominent political donor, contributing more than $130,000 to Rendell alone since 2001, according to state campaign finance records.
But Rendell said the state's pledge of financial help was "in no way, shape or form a political payback." He noted that he would not have made that pledge without recommendations from top advisers.
Boscov and Lakin made a last-minute bid for the company, which terminated an earlier agreement to sell its assets to Versa Capital Management, a Philadelphia-based private equity firm.