Requirements
Investing For the Long-Term Initiative (Invest MA) intends to promote the success of small businesses by boosting loans for those businesses through increased deposits that will add capital to a bank.
According to state data, small businesses and sole proprietorships make up 85% of businesses in our Commonwealth. Creating and supporting a strong small business sector, including a robust banking sector, is critical to providing the capital needed for Massachusetts's economic future. The Massachusetts Treasurer's office has created the Investing for the Long-Term Initiative (Invest MA) to shift state cash deposits under the control of the Treasurer to Massachusetts banks that are willing to expand their small business lending.
Program Status
We are now accepting applications for new banking partnerships. Small businesses should refer to the list of participating banks to identify active members for loan opportunities.
Purpose
The Massachusetts Treasurer's office created Invest MA to shift state cash deposits under the control of the Treasurer to Massachusetts banks that are committed to expanding their small business lending.
Small businesses are the cornerstone of the Massachusetts economy, and may include businesses that are community-based, independent, family owned, veteran owned, entrepreneurial, or non-profit. Historically, two-thirds of the new jobs created in the Commonwealth each year originate from small businesses. Clearly, a strong small business sector is critical to Massachusetts's economic future.
Tightened credit markets, as a result of bank failures and Federal Reserve interest rate increases, represent additional difficulties for small businesses seeking loans. However, a number of financial institutions, primarily smaller local and regional banks, have continued to maintain or expand their small
business loan portfolios. These banks provide critical support for the Massachusetts economy.
Massachusetts law1 gives the Treasurer the authority to give preference to banks with a strong small business loan-making record when assigning cash deposits, subject to the Treasurer's responsibility to ensure the security of the funds and obtain high returns.
1 M.G.L. c. 10, § 10.
Goals
The primary objectives of Invest MA are to:
- Promote small business growth by providing creditworthy enterprises with greater access to bank loans.
- Provide capital support through cash deposits to banks with a strong record of small business lending.
- Obtain competitive interest rates on the Commonwealth's deposits.
- Require that all funds are insured or collateralized to ensure that there is no risk to the taxpayer's money.
Program Scope
The program has a total of $500.0 million for deposit in participating banks and deposits made to any one participating bank shall be no greater than $15.0 million.
- Memoranda of understanding (MOU) with participating banks have a two-year term, subject to the right of renewal by the Treasury for an additional period.
- A bank or the Treasury may exit the program at any time with 30 days’ notice.
- The Treasurer, at her discretion, may extend the duration or increase the amount of funds allocated to the initial phase of the program as needed to successfully meet its objectives.
Requirements for Participation
To qualify for the program, banks must:
- Be on the list of banks approved to do business with the Commonwealth, as maintained by the Commonwealth Division of Banks from time to time.
- Have a rating of at least "satisfactory" under Commonwealth and federal Community Reinvestment Act (CRA).2
- Banks must be adequately capitalized. "Adequately Capitalized" shall mean, consistent with 209 CMR 47.00 et seq., if the bank meets the definition of an adequately capitalized institution as defined under the prompt corrective action provisions of the Federal Deposit Insurance Act, 12 U.S.C. 1831(o), and the Federal Deposit Insurance Corporation's Capital Adequacy Regulations, 12 CFR 325.103.
- Banks will be expected to offer interest rates equal to the Massachusetts Municipal Deposit Trust (MMDT) Cash Portfolio Daily Gross Overnight rate minus 60 bps at the time the MOU is signed.
- Rates will be adjusted on the first business day of each calendar quarter. Interest earned will be wired to the State Treasury on a quarterly basis.
- Deposits must be fully secured by insurance or collateralization. Membership by the financial institution in the Depositors Insurance Fund (DIF) will meet this requirement.
- In accepting state funds, banks must commit to using the funds to increase their loans to creditworthy small businesses as defined in M.G.L. c. 23A, § 57. Alternatively, banks may define a commercial loan of $50,000.00 to $1,000,000.00 as a small business loan.
- Terms and conditions of the individual loans will be set by the banks and will not be subject to review by the Treasury.
- Banks will make determinations of creditworthiness according to their own guidelines and procedures. The Treasury does not seek to encourage, nor will it provide guarantees for, loans with excessive risk.
- Banks will agree to publicize, market, and promote the program to small businesses in their market area. The design and execution of the marketing program will be solely determined by the bank.
- Deposits made to any one institution will be no greater than $15.0 million under this program and participating, qualified banks may accept less than $15.0 million. At the discretion of the Treasurer, banks with successful programs that originally accepted less than $15.0 million may subsequently receive additional funds up to a maximum of $15.0 million.
2 M.G.L. c. 29, § 34.
Disclosures and Reports
- A "qualifying loan" for purposes of disclosure under this program will be a small business loan determined to have resulted from participation in the program.
- The Treasury's intent is to minimize the regulatory requirements and paperwork associated with this initiative. With respect to the information requested below, extracting relevant data compiled for other agencies (e.g., FDIC Quarterly Call Reports) will meet our needs.
- To verify compliance with the objective of increased small business lending, participating banks will be required to:
- Disclose amount, type of loan, type of business and location.
- Report to the Treasury on a semiannual basis qualifying loans made during that time period to small businesses.
- Disclose publicly on its website and in any other manner to be determined by the Treasury, its participation in the program.
- Meet with Treasury officials on an annual basis, or as required by the Treasury, to assess the program results and the bank's compliance with its terms.
Additional Selection Factors
- The program will be statewide in scope and support small businesses in all regions of the Commonwealth.
- The Treasury will endeavor to ensure that Gateway Cities3 are fairly represented in the program.
- Banks will be asked to outline plans to ensure fair opportunities for small businesses to compete for loans under this program, including local businesses that increase employment among and within low- and moderate-income communities. As with CRA, these criteria should reflect the demographic makeup of a bank's market.
- The Treasury will give preference to institutions that are chartered in the Commonwealth of Massachusetts.
3 See M.G.L. c. 23A, § 3A.