October 05, 2010
FOR IMMEDIATE RELEASE
October 5, 2010
Federal small business credit initiative modeled after Michigan program
LANSING - Governor Jennifer M. Granholm today joined with representatives of small businesses and lending institutions to discuss access to capital issues facing small businesses and to highlight the new State Small Business Credit Initiative, a component of the Small Business Jobs Act signed last week by President Obama. The initiative was modeled after the state's Michigan Supplier Diversification Fund (MSDF) that uses state resources to leverage private loans for manufacturers seeking to diversify into new sectors, including clean energy.
"Small businesses are vital sources of innovation and job creation in Michigan and the federal funding will provide a six-fold increase in the state's ability to aid our small businesses," Granholm said. "The new State Small Business Credit Initiative builds on Michigan's leadership in helping entrepreneurs by ensuring greater access to capital to support small business growth and new jobs."
The State Small Business Credit Initiative will provide approximately $78 million for Michigan's loan enhancement programs, including the MSDF and the Capital Access Program. Operated by the Michigan Economic Development Corporation, these programs help Michigan businesses access credit by leveraging private sector capital.
Many Michigan companies such as auto suppliers have been unable to access capital because the value of their property and equipment has diminished, preventing them from meeting standard collateral requirements. The State Small Business Credit Initiative makes up this collateral shortfall by depositing funds with the lending institution of up to 49.9 percent of the loan. The state owns and earns interest on the deposited funds, and the lender is protected in the case of a loan default through a lien on the funds.
To date, the MSDF has supported 25 loans with a state investment of approximately $13 million. This state investment has leveraged $100 million in private loans to Michigan companies.
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