Linked Deposit Loan Program
Program Overview and Background
The Washington State Legislature found that minority and women owned businesses had been historically denied access to capital and that lack of capital is a key barrier to the development of minority and women owned businesses. In response, the legislature passed the 1993 Minority and Women Owned Business Assistance Act, which created the Linked Deposit Program ("LDP"). The Act directs the Office of the State Treasurer ("OST"), and the Office of Minority and Women's Business Enterprises ("OMWBE") to operate a program that links the deposit of state funds to loans made by participating financial institutions to qualified minority and women-owned businesses. The deposit of state funds is made at below market rates. The savings are then passed on by the bank to the Linked Deposit borrowers in the form of an interest rate reduction not to exceed two percent (2%).
Any firm currently certified by OMWBE as a Minority Business Enterprises (MBE), Women's Business Enterprise (WBE), Minority Women's Business Enterprise (MWBE), or Combined Business Enterprise (CBE) is entitled to the Linked Deposit benefit. Any business related loan carried by a certified firm, and made by a participating lender, is eligible for enrollment in the program. A firm must be certified by OMWBE before their business loan can be enrolled in the program. To learn more about certification and eligibility criteria visit the OMWBE Certification Page. Please note, the LDP is not a loan or loan guarantee, and the State cannot help a firm obtain a business loan. Firms must satisfy their bank's financing/loan criteria. The LDP allows a certified firm to receive an interest rate reduction on existing business loans made by a participating lender. For loan eligibility, contact your financial institution.
How the Program Works
The State Treasurer is authorized to use up to $175 million (as of 6/12/08) of the State's short-term surplus funds to purchase certificates of deposit in an amount equivalent to the amount financial institutions loan to certified minority and women's business enterprises. The LDP "links" the State's surplus fund deposits to the commercial loans that financial institutions make to certified minority and women's business enterprises. Two percent (2%) of the interest that is earned on the State's certificate of deposit is used to reduce the interest rate that would otherwise be charged to a certified business for its loan or other financing. If the interest rate returns earned by the State on the CDs fall below 2%, banks are allowed to reduce the interest rate reduction passed onto the firms by an equivalent amount. Effectively, the State buys certificates of deposit equal to the amount lent to certified firms. The State then forgoes 2% of the interest it would earn on the CDs and the banks transfer the savings to the certified firms in the form of an interest rate reduction.
- Businesses participating in the LDP must be certified by OMWBE or the Department of Veterans Affairs (DVA).
- Businesses must satisfy their participating bank's lending criteria.
- Qualifying loans include:
- Lines of credit
- Financing of accounts receivable
- Working capital
- Equipment purchases
- Real property acquisition
- Other business related financing
- $1 million per-loan maximum; no limit on the number of loans a firm may have.
- Lifetime maximum of $5 million.
- Interest rate: Up to two percent (2%) below the market rate for a commercial loan (determined by the bank).
- If the effective return on the timed CD is less than 2%, the interest rate reduction passed onto the firm can be reduced by an equivalent percentage.
- Loan term: Up to 10 years.
- Participants decertified by OMWBE will have their loans removed from the program, at which time they will lose the interest rate reduction.
Any qualified public depository, who is signed up through the Automated Clearing House, is able to participate in the Linked Deposit Program. Bank representatives are encouraged to contact the Office of the State Treasurer to register their bank as a Linked Deposit lender in order to offer the program to OMWBE certified firms and Veteran or Servicemember Business Owner customers. Borrowers should contact their bank to determine if it currently offers the Linked Deposit Program to its customers.
For more program information contact Kathryn Akeah at KathrynA@omwbe.wa.gov
- Columbia State Bank
- EastWest Bank
- Heritage Bank
- Key Bank
- Liberty Bay Bank
- River Bank
- Timberland Bank
- Umpqua/Sterling Savings Bank
- United Business Bank
- US Bank
- Washington Trust
- Wells Fargo