Small Business Financing in Michigan: Loans, Grants, and Investments
- June 14, 2018
- Posted by: Ashley Sutphin Watkins
- Category: Small Business Loans
There are different scenarios in which you seek small business financing in Michigan.
You might be starting an entirely new business, for example. Or maybe your business needs funding to expand or to purchase new equipment.
When you’re searching for small business financing in Michigan, there are a few primary options. There are loans, grants, and investments from outside individuals or organizations.
Each of these financing options has its own set of pros and cons that have to be carefully weighed and considered. Read on to get an overview of some Michigan small business financing options.
Small Business Loans in Michigan
Small business loans are debt financing used by organizations to fund whatever their needs might be. Michigan banks offer certain loans specifically designated for small businesses. A small business, according to the Small Business Administration, is one that has fewer than 500 employees, and less than $7 million in yearly revenue.
Michigan small business loans are similar to getting financing for something like a home or a car, and some are structured as revolving lines of credit. The primary benefit of obtaining a small business loan in Michigan is that owners can get financing without giving away ownership of their business, which they would likely have to do if they sought investments.
Here are some of the banks offering small business loans in Michigan.
Genisys Credit Union
Genisys is a Michigan financial institution offering SBA loans, as well as lines of credit, term loans, and commercial mortgages. Specifically, Genisys offers the SBA 7(A) Loan with fixed rates and a maximum set by the SBA. There is also an SBA Express Loan, with a variable rate, extended terms, and maximum rates also set by the SBA.
Michigan First Credit Union
Michigan First Credit Union offers SBA, MEDC, and USDA loan financing. This credit union offers competitive rates and flexibility and can tailor loans and credit to the needs of the business.
Small Business P2 Loan Program
The Small Business P2 provides up to $400,000 with a current interest rate of 5 percent or less to independently owned small businesses. Businesses that qualify for funding through the P2 Program are ones that eliminate or reduce waste and focus on environmentally-friendly reusing, recycling, and conservation. The loan comes from a fund that was started with the passing of the Clean Michigan Initiative.
This program is available through a partnership with Goldman Sachs. Invest Detroit helps improve small business owners’ access to business education, capital, and support services. Loans are available for amounts of $50,000 up to $750,000, and the terms include a clear exit strategy for the fund, with repayment expected in five to seven years. Interest rates are fixed, and collateral requirements include business assets and meaningful equity. Businesses need to have been in operation for at least two years, have a minimum of two employees, and must be able to show revenues of more than $150,000.
Michigan Small Business Grants
Michigan small business grants are another funding option, but they’re often overlooked. Small business grants don’t have to be paid back, so they’re frequently called free money. They also don’t require business owners to give up a portion of their ownership. However, most small business grants do have stringent eligibility requirements. Here’s a look at some Michigan small business grants.
Michigan Biomass Energy Program
The Michigan Biomass Energy Program offers funding of up to $2,500 is available for businesses that use biomass in Michigan.
Michigan Public Service Commission Low-Income and Energy Efficiency Fund
This grant supports energy-efficient projects and renewable energy projects in the U.S. Funding varies by amount and is available to businesses, nonprofits, government agencies, and schools.
Amber Grant for Women
The Amber Grant is available to women in Michigan and around the country. There is a $1,000 Amber Grant awarded by a jury each month. The year’s 12 winners are eligible to win a $10,000 end-of-year grant as well.
Small Company Innovation Program/Technology and Commercialization Assistance
This program provides matching funds of up to $40,000 for small businesses in Michigan. It is intended to cover the costs of research and development projects done at Michigan public universities. Specifically, grants can cover the costs of faculty and business expertise, the use of equipment, and access to things like testing services.
Creative Corridor Incentive Fund
For businesses in certain industries including media, architecture, design, and fine arts. Businesses should benefit from working in the Central Business District, Midtown, and New Center.
State and Local Implementation Grant Program
There are dozens of these awards totaling $116.5 million to 54 U.S. states and territories. Categories include consultation, planning, governance, and outreach.
Detroit Development Fund
The Detroit Development Fund provides different funding opportunities to business owners and entrepreneurs who are dedicated to improving the city of Detroit.
NEIdeas: Rewarding Ideas for Business Growth
This program provides $500,000 to small businesses in Detroit, Highland Park, and Hamtramck. NEIdeas recognizes businesses considered cornerstones of the community, and individual awards are $10,000 and $100,000.
Accelerate Michigan is a competition open to businesses at any stage, with the goal to have companies focused on new technology competing for a $500,000 award.
Small Business Investors in Michigan
Investors are another option available to Michigan small businesses. Within the larger category of investors, there are different types. Angel investors are usually individuals who have the financial means to invest in startups. Some angel investors may want a return on their investment, while others might want partial ownership, or to have a say in the operation of the business.
Venture capitalists are organizations that provide funding to companies and usually have a history of being able to deliver returns. Venture capitalists typically won’t invest in very new or risky businesses. Here are several small business investors in Michigan.
Ann Arbor Angels
Ann Arbor Angels is a group of angel investors who work primarily with innovative companies in the early stages. The location they focus on is Southeast Michigan. Some of their funding criteria include an annual revenue potential of at least $50 million, a strong strategy for capturing market share, and a strong team, although that team doesn’t have to be complete.
Aria Ventures is based in Michigan and provides what they describe as early stage development services.
Based in Ann Arbor, Augment Ventures’ primary areas of focus for investments are early-stage companies in physical science, software, and smart hardware. When selecting companies to invest in, they look for the market opportunity, a strong team, and a strong technology portfolio all paired with a sustainable business model.
Capital Community Angel Investors
Capital Community Angel Investors provides early-stage funding. They look for Michigan-based companies with the ability to demonstrate high growth potential. Companies should be seeking an investment round size of at least $100,000, and their business plan should show revenue forecasting $5 million or more within five years.
Getting Your Business Ready for Financing in Michigan
There are some steps a business can take to prepare to get financing, whether in the form of loans, grants, or investments. The following are some steps to take:
- Make sure you have a strong business plan in place. The business plan is something you’re going to need regardless of the type of funding or financing you’re seeking.
- Be able to show how your team is going to lead your business to a successful future. This is something investors look at, even if you don’t already have a history of strong revenue to show them.
- Identify what your financial needs are, and why you need a loan, investments, or a grant. For most people, they need financing either to start or grow a business, but it’s best to be specific with your needs.
- For a business loan, and often even in investment scenarios, you may need to show your credit history or the credit history of your business. You may also need to have financial statements and tax returns to show, and in some cases, you may need collateral for a loan. You should be able to show your cash flow history and projections.
Finally, you might also need a business bank account to get ready for financing.
What Kind of Small Business Financing Do You Need?
There are advantages and disadvantages to every type of funding highlighted on this list, so how do you decide which Michigan small business financing option is best for you?
First, you need to think about what you ultimately want in terms of your business. You need to think about your financial goals, as well as the general goals involving your business for the next year to two years. That can help you identify the optimal way to achieve those specific goals. You should also think about milestones you hope to hit during this time.
Also, consider factors like growth potential, market share, and market size. These can determine whether or not business investments could be a viable option for your business. If you can’t clearly articulate these things, it’s not likely you’re going to get investors interested. Investors also tend to invest in very specific vertical markets or types of technology, so certain types of businesses probably aren’t going to fit into this.
If you can show your business has the potential to be profitable, but not that it has a large market, you may not be able to target investors successfully.
Another thing to consider is whether or not you’re okay with giving up control of your business. If you’re not comfortable with outsiders having a say in your business, you might be better off with a traditional bank loan or looking for grants.
Regarding loans, if your business is generating a lot of revenue already, then it might be better for you to go with a small business loan. You’ll be better equipped to pay it off and you won’t have to give up any control of the business.
Basically, there’s not one answer that’s right for every business when it comes to funding and financing. You need to think about the current state of your business, as well as where you expect to be in the future. There are very specific things investors are looking for, and if you don’t meet those expectations, you may instead go with a traditional bank loan. Also, almost all businesses should be looking into grants, as they are a form of free money.