HopCat in downtown Grand Rapids ranks as one of the top beer bars in both the world and nation. Photo by Adam Bird
First National Bank of Michigan, with headquarters in Kalamazoo and offices in Grand Rapids and Portage, has announced it has made a capital investment in the newly formed Grow Michigan LLC fund.
Grow Michigan specializes in lending to established small businesses that need to grow. It was formed in 2012 by a collaboration of Michigan banks, the Michigan Economic Development Corp. and the Michigan Strategic Fund. The fund was created to fill in a gap in capital access in the state; in February, it completed its first round of capitalization and commenced making loans.
Grow Michigan mezzanine loans, made in conjunction with senior loans, are in the $500,000 to $3 million range, in the form of three- to five-year subordinated debt. Subordinated debt means the bank making the loan will be repaid first in the event the borrowing company fails and is liquidated in bankruptcy.
Mezzanine financing is perceived as being between bank financing and venture capital, and is seen as an alternative to venture capital, being less expensive. However, mezzanine financing is generally more than the amount traditionally available at a bank.
The fund extends the capabilities of senior debt providers with a cost-effective capital structure for helping Michigan small businesses grow and prosper.
In June, Grow Michigan announced it had made a non-equity investment in EL Brewpub LLC, a wholly owned subsidiary of Barfly Ventures LLC, a Grand Rapids-based holding company led by Mark Sellers that also owns and operates HopCat, Grand Rapids Brewing Co., McFadden’s and Stella’s Lounge in Grand Rapids.
Grow Michigan said its investment was made in collaboration with Mercantile Bank and positions Barfly to extend its highly successful business platform into mid-Michigan in East Lansing’s vibrant and walkable downtown.
Other commercial and community banks that invested in Grow Michigan’s initial fund are Fifth Third Bank, PNC, Huntington, The Private Bank, Crestmark Bank, Seaway Community Bank, The Bank of Holland, The Bank of Northern Michigan and Mercantile Bank.
“First National Bank of Michigan’s investment in Grow Michigan once again demonstrates the Bank’s commitment to and involvement with the State of Michigan and economic development, and speaks highly to the bank’s mission to help local businesses grow and succeed,” said John M. Schreuder, CEO of the bank.
The $60 million Grow Michigan fund is a collaboration between members of Michigan’s banking community and the state’s Michigan Strategic Fund and was founded by veterans of Michigan’s finance and business industry. Grow Michigan headquarters are in Plymouth; its founding members include Russell Youngdahl Jr., David Treadwell, Henry Brennan III and E. Mark Gregory III.
Treadwell, Brennan and Youngdahl serve on the Grow Michigan board of managers with Treadwell as chairman. Gregory chairs the investment committee; Youngdahl serves as CEO.
“We are pleased to have First National Bank of Michigan as a Grow Michigan investor,” said Youngdahl. “FNB Michigan’s philosophy and commitment to Michigan’s small business community matches perfectly with the Grow Michigan philosophy, and we look forward to a long and successful relationship.”
First National Bank of Michigan is locally owned, and its deposits stay in Kalamazoo, Portage and Grand Rapids to fund business loans. The bank said its lending decisions are made locally by experienced bankers committed to helping individuals and businesses grow and prosper.
The MEDC said Grow Michigan’s mission is to accelerate growth and capital investment in some of Michigan’s most promising small businesses, to spur job creation and improve the state’s business climate.
“Small businesses are job creation engines, and our work to make cost-effective risk capital accessible to Michigan companies means real potential for immediate job growth,” said Michael Finney, MEDC president and CEO.
“Grow Michigan demonstrates the genuine leadership, cooperation, co-investment and policy support that our commercial banking partners have provided throughout truly difficult times. They are stepping up to the plate and making a difference.”
A Michigan small business interested in borrowing from the Grow Michigan fund would simply approach one of the member banks to apply.