State to deploy $72M in first round of federally funded small business loans, investments

The state has begun the process to dispense nearly $237 million in federal funding to support small businesses.

Up to $72 million of the funding Michigan received from the federal Small Business Credit Initiative 2.0 will go for loans to small businesses through an array Michigan Economic Development Corp. capital and lending programs, state officials announced on Thursday.

The MEDC also will direct up to $75 million for equity investments in early-stage, technology-based businesses in Michigan through the Small Business Venture Capital Program that will invest in venture capital firms operating in Michigan as a limited partner. Venture funds would use the funding to invest in qualified businesses.

“Michigan’s venture capital ecosystem has experienced incredible growth in recent years, including being recognized nationally as the fastest-growing state for VC investment just last year,” Fred Molnar, the MEDC’s vice president of entrepreneurship and innovation, said in a statement. “We remain committed to working with our partners across all corners of the state to deploy every federal and state resource available to spark additional innovation and economic opportunity here in Michigan.”

As MiBiz reported in July, venture capital investing in Michigan reached an all-time high in 2021 for the amount invested, as the industry built further momentum, continued the growth trend of several years and as the state attracted more outside investors to participate in deals.

Michigan-based venture capital firms invested a record $1.38 billion into 155 companies last year through 161 deals, according to the Michigan Venture Capital Association’s 2022 Impact Report released last month. That compares with $949 million in venture capital investments in 2020 across 162 deals that involved 147 companies.

The MEDC will accept applications from venture capital firms for the Small Business Venture Capital Program over three years and until funding is exhausted. The Michigan Strategic Fund Board will make the final decisions on investments in venture firms.

Awarded in May by the U.S. Department of Treasury, Michigan’s $236.9 million share of the State Small Business Credit Initiative (SSBCI) comes from $10 billion allocated to states under the American Rescue Plan Act that President Biden signed into law in March 2021.

Funding from the Michigan Business Growth Fund 2.0 that will deploy the SSBCI money would go to support small businesses in an array of sectors: manufacturing, professional and corporate services, engineering, design and development, financial services, mobility, medical device technology, high-tech agriculture, tourism, and logistics.

Under federal guidelines for the SSBCI, Michigan must steer $39.8 million of the federal funding to small businesses that are owned by socially and economically disadvantaged individuals. Another $12.9 million would have to go to small businesses that employ 10 people or less where the need for more access to capital is particularly high.

The MEDC within 60 days will announce an application process for loans of up to $250,000 made through specified small business lenders.

“By providing this support to small businesses, especially traditionally underserved entrepreneurs, throughout Michigan, we are generating greater economic impact for all Michigan residents,” MEDC Senior Vice President of Small Business Services Amy Rencher said in a statement.