Michigan is leading the nation in maximizing federal funds aimed at boosting small business growth, attracting private investment and creating jobs, according to a U.S. Treasury Department report released in early July.
“These funds have proven to be a vital element in driving economic growth in communities around the state,” said Michael Finney, President/CEO of Michigan Economic Development Corporation. “Small business is the backbone of the economy, and these federal funds provide entrepreneurs and small businesses with timely financing to grow their business and create jobs.”
Since 2011, Michigan has distributed $79.4 million from the State Small Business Credit Initiative (SSBCI), a federal program established a year earlier in the aftermath of the Great Recession and modeled after a state of Michigan program to bolster the collateral position of manufacturing companies. Federal funds dispersed to small business and local lenders have been used to finance more than $420 million in new private investment and create 4,600 jobs in Michigan, according to MEDC estimates.
SSBCI funds are managed through MEDC’s Capital Access unit, which uses the funds in several different initiatives including collateral support, loan participation and the Capital Access Program (“CAP”). The Michigan Strategic Fund board, which has broad authority to promote economic development in the state, approves the programs and transactions.
A federal program administered by the U.S. Treasury Department, SSBCI was funded initially with $1.5 billion through March 2017, and projected to stimulate up to $15 billion in business growth. Michigan received the second highest allocation among states behind California, which received nearly $168 million of SSBCI funds. To date, $835 million of the total has been expended. President Barack Obama proposed an extension of SSBCI in his 2015 budget, including an additional $1.5 billion.
In response to the devastating economic impact of the Great Recession in 2009, MEDC created the Michigan Supplier Diversification Fund. That program is the prototype for SSBCI. At the time, with the impending bankruptcies at General Motors and Chrysler and Ford’s top-down restructuring, many banks were forced to dramatically reduce lending to automotive manufacturers and supplier companies. MEDC bolsters the collateral of many of these companies seeking loans. In many cases, the infusion of support improved companies’ cash flow, effectively keeping businesses financially afloat.
In the last five years, the Michigan Supplier Diversification Fund and SSBCI have combined to attract $630 million in private investment while creating more than 6,700 jobs in the state.
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