Grow Michigan LLC approved a dozen loans its first year worth $20.1 million, and small business borrowers include a Grand Rapids brewpub business that has opened a new pub in East Lansing.
Based in Plymouth, the Grow MI firm was formed in 2012 by a collaboration of Michigan banks, the Michigan Economic Development Corp. and the Michigan Strategic Fund. The $60 million fund was created to specialize in lending to established small businesses that need to grow, with three of the banks involved being Grand Rapids-based The Bank of Holland and Mercantile Bank, plus FNB of Kalamazoo.
By the close of 2013, Grow MI had approved loans that are now part of total capital investments of about $141 million. The small businesses making those investments currently employ more than 1,000 Michigan workers, with growth commitments of an additional 250 jobs across nine Michigan counties. Seven of the 12 investments were made in low to moderate income areas, and all are eligible for the Community Reinvestment Act, according to Grow MI.
The Community Reinvestment Act, enacted by Congress in 1977, is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate.
The Grow MI fund has $35.7 million of committed capital from Michigan banks and the Michigan Strategic Fund. Grow MI says it provides “attractively priced” risk capital in the form of subordinated/mezzanine debt to Michigan small businesses. Grow MI mezzanine loans, made in conjunction with senior loans, range from $500,000 to $3 million in the form of three-to five-year subordinated debt.
Grow MI said its collaboration with the MEDC and Michigan Strategic Fund extends the capabilities of senior debt providers by offering efficient and cost-effective risk capital for growing Michigan small business in a broad range of industries. One of the burgeoning new industries that is benefiting from the available capital are brew pubs.
Last June, Grow MI announced it had made a non-equity investment in a new East Lansing subsidiary wholly owned by BarFly Ventures LLC of Grand Rapids, a 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 MI said its investment was made in collaboration with Mercantile Bank and enables BarFly to extend its successful business platform into East Lansing’s vibrant and walkable downtown.
In early February, BarFly Ventures said it would open a third brew pub in Detroit in 2014, although apparently it is not funded by Grow MI. It will be a $3.3 million project located in Detroit’s Midtown neighborhood on Woodward Avenue in a building that had been vacant since 2006 and was purchased from the Michigan Land Bank. Sellers noted that the Detroit HopCat will be within blocks of Wayne State University, TechTown and the future home of the Detroit Red Wings, and will have 130 beer taps, the most of any bar in Michigan.
A spokesperson for Grow MI said the firm does not reveal the dollar amount of its loans, or the amount invested by each of the banks.
Grow MI was founded by Russell Youngdahl Jr., founding and managing member of NorthStar Capital; Henry Brennan III, partner at Howard and Howard law firm; David Treadwell, former CEO of EaglePicher Corp.; and E. Mark Gregory III, formerly executive vice president of Comerica Bank. Youngdahl, Brennan and Treadwell are directors of Grow MI, with Gregory leading the Grow MI investment committee.
“Reasonably priced growth capital for Michigan’s small business community was much discussed, but not available,” said Youngdahl, CEO of Grow MI. “We have been successful in proving that with the proper underwriting and partnerships, we can accelerate growth in Michigan by filling the capital needs for small business.”
The Grow MI board of managers includes equal representation from the investor banks, the Michigan Strategic Fund and the founding members of Grow MI.
Besides the three West Michigan banks already noted, other investors are commercial and community banks including Fifth Third Bank, PNC Bank, Huntington, The PrivateBank, Crestmark Bank, Chemical Bank, Independent Bank, Northstar Bank, The Bank of Northern Michigan and OSB Community Bank.
“Working with Grow Michigan has allowed PNC Bank to expand the reach of its small business lending while supporting our community redevelopment activities,” said PNC Bank Regional President Ric DeVore. “Investing in Grow Michigan is one of the many ways PNC Bank is contributing to the growth of the Michigan economy.”