Texas Linked
Deposit Program
OVERVIEW:
The State of Texas Linked Deposit Program (“Linked Deposit Program”)
was established to encourage lending to historically underutilized businesses,
child care providers, non-profit corporations, and/or small businesses
located in an Enterprise Zone by providing lenders and borrowers a lower
cost of capital.
PARTICIPANTS
This program is a partnership between the State of Texas Treasury, approved
depository lenders, and the Texas Economic Development.
USE OF PROCEEDS
Use of proceeds may include working capital, the purchase, construction,
or lease of capital assets, which include land, buildings, and equipment.
Loans to start-up businesses are permissible, subject to lender’s
normal credit evaluation.
ELIGIBILITY
An eligible lender must be a lending institution who has been approved
as a State Depository Bank by the Texas State Treasury Office.
An eligible borrower
must be a Historically Underutilized Business, child-care provider,
non-profit corporation, and /or a small business that is located in
an enterprise zone.
· A Historically
Underutilized Business is defined as a for profit corporation, sole
proprietor, partnership, or joint venture whose ownership is at least
51% African American, American Indian, Asian Pacific American, Hispanic
American, or woman.
· A child-care
provider is defined as a small business that operates or proposes to
operate a day-care center or a group day-care home, as defined by Section
42.002, Human Resources Code.
· A non-profit
corporation is defined as a not for profit corporation organized under
the Texas Non-Profit Corporation Act.
· A small
business is defined as a for profit, independently owned and operated
entity that employs less than 100 full-time employees.
TERMS
· Minimum
loan amount is $10,000
· Maximum
loan amount is $250,000
· Loan term
will usually be the useful life of the asset being financed
EXAMPLE
Participating lenders
receiving State Treasury deposits pay the Treasury a lower interest
rate on the deposit, instead of the usual higher deposit interest rate.
The rate paid by
the lender to the Treasury (the Linked Deposit rate) is based on the
current 2 year Treasury note rate less 2.0% or the floor rate of 1.5%.
The lender may add up to a maximum of 4 percentage points to the rate
over the treasury bill rate to determine the borrower’s loan rate,
passing on a lower loan rate to the borrower.
SAMPLE
4.96% + 4.0% =
8.96%
Market: T-Note
Rate Points charged to borrower (max 4 pts.) Maximum Borrower Rate
4.96% - 2.0% =
1.50%
Market: T-Note Rate
Lender’s Linked Deposit Rate: (floor rate of 1.5%)
PROCESS
Applicants must
apply with a participating lender who will determine program eligibility.
Loans will be subject to the lender’s normal credit evaluation.
The lender will
submit an application to Texas Economic Development Linked Deposit Program
Manager, who will respond to the lender within 24 hours. If approved
by The Texas Economic Development, the application will be forwarded
to the Treasury for approval.
The lender will
close and fund the loan only after confirming the actual current market
rate with the State Treasury the day before funding. The Linked Deposit
rate and the borrower’s loan rate is based on the rates provided
by the State Treasury.
After the loan funding,
the State Treasury will wire transfer the Linked Deposit proceeds to
the lender. The State Treasury will mail a confirmation notice to the
lender two days after the wire transfer is made.
FEES
Normal and customary
fees may be charged by the lender. No additional fees are charged by
The Texas Economic Development.
RESOURCES:
Participating
Lenders List Word
FORMS:
Linked
Deposit Program Application
CONTACT
US:
For further information and assistance, contact:
Texas Economic Development
Office of Business Services
P.O. Box 12728
Austin, TX 78711
512-936-0528 or 512-936-0504 (VOICE)
512-936-0520 (FAX) 512-936-0555
(TDD) 800-735-2988
(RELAY TEXAS)
E-Mail: finance@TxED.state.tx.us
Texas State Comptroller
- Treasury Division
State Depositories
Carloyn Turney 512/463-5908
Wolf Boulding 512/463-6069
Linked Deposit Program/Rate:
Eddie Willis 512/463-5907
Fax Number 512/463-6079
The Texas
Economic Development is an equal opportunity employer/program.
Auxiliary aids and services will be made available on request to individuals
with disabilities.
