Due to the success of its pilot lending program, a collaborative initiative between Huntington Bank and the Michigan Economic Development Corp. is bringing micro-loan opportunities to small businesses.
Huntington Bank, a $69 billion asset regional bank holding company headquartered in Columbus, Ohio, announced July 28 it is expanding its Pure Michigan Micro Lending Initiative in collaboration with the MEDC, adding a five-year, $5 million micro-lending commitment to small businesses.
The expansion is anticipated to create approximately 500 new small business jobs and bring micro-lending opportunities in 17 counties across West, Southwest, Central and Southeast Michigan: Kent, Kalamazoo, Van Buren, Ottawa, Montcalm, Muskegon, Allegan, Newaygo, Oakland, Clinton, Eaton, Ingham, Ionia, Macomb, Livingston, St. Clair and Wayne.
Chris Cook, director of capital access at the MEDC, said the goal of the program is to increase availability of capital to very small businesses, which typically have difficulties obtaining financing based on the size of the loans they are seeking.
“It is a collaboration between the MEDC and Huntington National Bank, wherein Huntington pledged $25 million to be lent to community development financial institutions, which are lending organizations,” said Cook. “(CDFIs) lend money to small businesses and typically have a limited availability of capital. So this funding allows them to provide additional loans.”
John Irwin, president of the West Michigan region at Huntington Bank, said the expansion was prompted by the company’s continued belief that small businesses drive job creation in communities.
“Our belief, as well as our collaborative partners that we have joined up with here, all believe that if these small businesses get started in neighborhoods, add jobs, it is really a revitalization process,” said Irwin.
“We are all committed to economic vitality in our communities and we have to focus on small businesses, who are the real job creators.”
The Pure Michigan Micro Lending Initiative’s expansion into the West Michigan region also includes partnerships with regional and local organizations, such as Grand Rapids Opportunities for Women, Michigan Small Business Development Center, LINC Community Revitalization, and Opportunity Resource Fund, which is an established Michigan micro-lender.
Huntington’s micro-loan pool funds will be allocated through Opportunity Resource Fund; small business owners and entrepreneurs can connect with the various organizations to apply for financing from the micro-lender.
“We wanted to put together wraparound services so that a small business can have access to people for their business plans, feasibility studies and walk them through the application process, because what we want to do is have success,” said Irwin.
“It is not just about lending money; it is about making sure these businesses do well, prosper, grow and create jobs,” he added.
The micro-loans typically range from $1,000 to $100,000, but the Pure Michigan Micro Lending Initiative can grant up to $250,000 in funding, according to a press release. The community partners will collaborate to help small business applicants prepare for the lending process, which can often be difficult due to factors such as insufficient credit history.
“They have good ideas, but they just don’t have access to capital. They can’t get traditionally financed by a bank yet because they may have limited operating history or not enough collateral,” said Irwin. “We kind of help them get their plans together to give them the best chance of survival.”
As Huntington’s collaborative partner, the MEDC provides a guarantee on loan losses up to 20 percent of the total fund made by the lending organizations to individual businesses.
“These loans to very small businesses — in some cases, start-ups — there is a slightly higher risk than a traditional senior bank debt,” said Cook. “Huntington asked MEDC to provide a guarantee on a portion of the underlying loans.”
While nonprofit businesses may not be eligible for financing through the innovative lending collaboration, Irwin said the intent is to have anyone in small business receive guidance from the MI-SBDC, GROW, or similar organizations.
“Both Opportunity Resource Fund and GROW have other sources to meet those,” said Irwin in reference to nonprofit businesses seeking financing. “We are trying to have small businesses work with them to figure out the best way they can get financing, either through this micro-loan program or through something else.”
The Pure Michigan Micro Lending Initiative was originally launched in Detroit in 2013 as a pilot program with approximately $5 million available in micro-loan funding from Huntington Bank.
The program, which was solely operating in the Detroit area until the recent announcement, was part of an overall $25 million lending commitment on behalf of Huntington Bank to the state of Michigan.
“They are nearly at $1 million of funding, so they are right on track in terms of what they wanted to do there,” said Irwin. “I was anxious to roll this out to our communities because we have a lot of entrepreneurial spirit in these local communities here across Southwest Michigan. It was a natural expansion.”
With the newest five-year, $5 million commitment, Huntington Bank has now made $10 million in micro-loans available to small businesses across Michigan.
“This latest announcement represents a significant expansion of the services area, as well as indicates all of the parties still think the program is of importance and that it is operating successfully so far,” said Cook.