A regional bank with branches on Whidbey Island will receive $18 million in federal funding to boost small business lending.

According to a news release from U.S. Sen. Maria Cantwell’s office, Lynden-based People’s Bancorp will receive the money from the Small Business Lending Fund. Part of the Small Business Job Act passed by Congress last September, the fund aims to jump-start the economy with increased lending.

“Small businesses are the engine of our economy and stand ready to drive us out of this recession,” Cantwell said in the news release. “The key ingredient to getting our small businesses investing, growing and hiring again is increased access to capital.”

According to the news release, small businesses employ about half of America’s workforce and account for about 60 percent of gross job creation. Small business owners faced “disproportionate challenges in the aftermath of the recession and credit crisis” with qualified lending being one of their biggest hurdles.

Cantwell, a member of the Senate Small Business and Finance committees, helped to create the  lending fund in hopes that it would encourage small business growth.

The fund works by allowing community banks with assets of $10 billion and under to apply for financing from the Department of the Treasury at attractive rates. It’s been built as a reward-based system.

According to the department’s website, the price a bank pays for the funding will be reduced as the bank’s small business lending increases. The initial dividend rate will be, at most, 5 percent.

If a bank’s small business lending increases by 10 percent or more with loans of $10 million or less to businesses with revenues of $50 million or less, then the rate will fall to as low as 1 percent.

In an email to the Whidbey News-Times, Tony Repanich, a People’s executive vice president for retail banking and marketing, said uncertainty from “the other Washington” about future required capital levels for banks of all sizes has the potential to slow lending.

“Even well performing banks like Peoples conserve capital when there is economic or regulatory uncertainty,” he wrote.

The lending fund is an affordable way for the bank to continue its “financial support of well-run businesses in the Northwest.”

“The (lending fund) means we have more than enough capital to make loans even if capital requirements increase,” Repanich wrote.

Peoples Bank has branches in both Oak Harbor and Coupeville.