Only about one year old, Whidbey Island Local Lending has started making loans to local projects.

“We think of it as recycling dollars,” said Lynn Willeford, one of the co-founders. “A good amount of us make our money on the island. We want to put it back into the island.”

The group formed to help people in the community who need loans to start or expand their businesses. It’s an alternative to bank loans. The small loans are ranging from as low as $300 to about $10,000 or more.

Borrowers can be start-ups, seasonal businesses such as landscapers or farmers who may need new equipment before the season starts, artists or individuals with the next big idea.

“We want to encourage young people with less access to credit to apply,” added Debora Valis, co-founder of the group.

Modeled after the Port Townsend group called Local Investors Opportunities Network, the Whidbey lending network has made its first two loans on Whidbey and has a few others going through the process. The first borrower was Sue Taves, who has used the money to launch the online publication Whidbey Life Magazine, which has since created jobs and grown significantly.

WILL follows basic principles. It’s a network of lenders, who use their personal money to back up projects they believe in. They are not a credit union and therefore exempt from federal guidelines.

“Our common belief is that we all benefit from a thriving community,” Valis said.

“We want to create jobs,” Willeford said.

Investors and borrowers become acquainted with each other — and with investing opportunities — first by attending an open house and then by email. Over the email network, clients tell prospective investors about a new venture or an expansion of an existing business. If investors think the proposal is worthy of funding, they will ask for more detailed information, a business plan and arrange to meet in person.

WILL does not give advice; and members know they are responsible for making independent decisions on loans. The loans are formalized in contract form and the conditions are worked out on an individual basis.

“There are risks,” Valis said. However, she added, comparable groups have rarely suffered negative experiences as borrowers feel a deeper commitment to their community and neighbors than to a faceless banking institution.

The project in Port Townsend has made a huge difference in the community, Valis said. As of January 2012, 20 investors had made 74 transactions for a total of $2.33 million in loans to local businesses and nonprofits throughout Jefferson County.

“Nothing has gone bad,” Valis said.

“It’s very personal,” Willeford added. “Many of us have made loans in our community before. This is just more formalized,” she added.

Valis emphasizes that the lending network is more like lending used to be based on a solid business plan and personal credibility — sometimes a good gut feeling, rather than credit ratings and numbers.

“We are stronger for being person to person and supporting good local business ideas,” Valis said.

She recalled when she and husband Steve Shapiro had to approach a bank to start the South Whidbey Clinic in the 1970s.

“We walked in there. Steve with his pony tail and beard. Two long-haired hippies,” she said.

The banker asked them to meet them at the Dog House for a pitcher of beer and by the end of the evening they had secured $40,000 to start the clinic.

“But the banking industry has changed. These days local banks have to look at numbers,” Willeford said. “We’re filling a niche.”

“This is going back to were we started. We’re going back so be can go forward,” Valis added.

Founders Shapiro, Valis, Willeford and her husband Blake strongly believe that investing on Whidbey Island is much more gratifying than investing in the stock market. And they have found many who agree with them.

They had their first meeting last May and soon after the network had 13 couples and five individuals ready to make loans. The group worked out procedures and rules to protect lenders and borrowers and to protect the privacy of those who apply.

Applications have begun to trickle in and Valis, who backed one of the first loans, said it is a gratifying experience to aid a promising business.

“By using our resources we can make Whidbey Island a more vibrant and connected community” she said.

Willeford encourages anyone interested in becoming a member of WILL to contact Alina Frank at eft@whidbey.net.

Willeford said anybody can be a lender as long as they are willing to make a loan and respect confidentiality.

To connect with lenders, email Steve Shapiro at shapiro@whidbey.com.

The next meeting is set for 7 p.m. Tuesday, Feb. 19 at Island Athletic Club.