Michigan has new lending alternative

Small businesses looking for financing have a relatively new option. The Michigan Credit Union Small Business Financing Alliance opened its lending window a few months ago by making millions available to qualified applicants, including owners of existing businesses and those who want to start one.

The CUSBFA is a partnership between the Michigan Economic Development Corp., the Michigan Small Business and Technology Development Centers and the Michigan Credit Union League. The MCUL is providing the loan funds as 35 of the state’s credit unions have pledged at least $43 million to bankroll the new program, which hopes to turn some business dreams into reality, create new jobs and help steer the state’s economy into a new direction.

But instead of taking credit for a lending initiative that many have said has been badly needed during a rough economic situation, MCUL President David Adams paid tribute to another for the ingenuity that formed the foundation of CUSBFA.

“Well, I have to give all the credit to Governor (Jennifer) Granholm. She has been a champion for small business. In her State-of-the-State in February, she talked about the new Michigan economy as kind of her swan song after all of the manufacturing job losses we’ve had. She is challenging us, appropriately, and this certainly gained bipartisan applause to realize that small businesses are the backbone of our economy,” said Adams.

“So she reached out to me because she knew that credit unions were the ones lending in this tough economy. In 2009, banks saw their commercial loans go down by 68 percent in Michigan, while for credit unions, our small-business lending went up by 18 percent in 2009. And that trend continues, as credit unions are the ones lending when others either can’t or won’t,” he added.

Adams admitted that credit unions are “small players” in the commercial loan field, as these lenders don’t do nearly the volume that banks do. But he said, credit unions are a good alternative for business owners and entrepreneurs to look to for financing. He also said bringing the MI-SBTDC into the fold was a natural move because it has the infrastructure in place for the program and was already offering the services that owners and wannabe owners needed.

“So we’ve set up a structure to create an alignment between the academic side, where business leaders get their training, versus the access to capital. We’re not going to be able to meet everybody’s needs, but we are starting to see applications trickle in. We’re starting to see more credit unions talking with these small-business owners to see if loans can be made where there is a business plan and where there is capacity to repay that loan,” said Adams.

“I think we’re going to see a lot of these small-business loans made that would not have otherwise been made.”

Adams said it wasn’t a hard sell to get credit unions to pledge the money for the program. In fact, he said all were quite receptive to the idea from the start. The dreadful economy, though, played a role in the amount pledged because, like banks, credit unions also have loan defaults and delinquent loans on the books, which makes it more difficult to underwrite good loans.

“But credit unions thrive in tough economic times. They become more relevant, whether it’s new vehicle loans or credit card loans or mortgage loans or, in this case, small-business loans. So they were very responsive to the opportunity. But they were also cautious because they know that a lot of these loans are start-up loans for entrepreneurial-type businesses, and it will be difficult to meet all the needs that are there. But they’re enthusiastic about trying to meet as many as possible,” said Adams.

Adams said he was pleased that the credit unions pledged $43 million to CUSBFA, but added that there was a lot more capacity available. He said credit unions in Michigan have about $10 billion of liquidity available to lend for all purposes and there is a lot of money on hand for business lending.

“This relatively small pool of money that was pledged was pledged in the spirit of trying to meet some of these more difficult small-business loans, start-up loans for entrepreneurial-type businesses. It’s just a first step. I think that credit unions were already making business loans, as I said, in this tough economy, and this is just another tool for them where they can get a line with the SBTDC centers to help reach more small businesses,” said Adams.

For more information on the financing alliance, go to www.cusbfa.com or contact a credit union or the MI-SBTDC.

What does Adams hope the program accomplishes?

“I’d like to see thousands of small businesses getting their financing from a credit union. I’d like to see the credit unions getting good loans that help strengthen these small businesses that one day will become bigger businesses,” he said. “I’d like to see good loans be made to thousands of businesses, and have that be something that drives us to this new economy that the governor talked about so much.”

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