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Michigan small businesses seeking to grow will be more likely to qualify for loans even in the face of an ongoing credit crunch thanks to an infusion of cash from the federal government that will bolster the state’s small business lending program, Governor Rick Snyder and the Michigan Economic Development Corporation (MEDC) announced recently.
The federal funds are being made available through the State Small Business Credit Initiative (SSBCI), part of the Small Business Jobs Act signed into law last October. Snyder made the announcement with U.S. Treasurer Rosa Rios at United Metal Products, a company that has benefited from the MEDC’s supplier diversification fund program, predecessor of the Michigan Business Growth Fund, on which the federal law is partly modeled.
“The problem in Michigan we’re facing is that credit-worthy companies are unable to get loans because banks have tightened up lending,” Snyder said. “This means small businesses that want to expand and hire can’t get access to needed capital. Using the federal funds to insure against default will give banks more confidence and make them more likely to lend, which will spark job growth.”
Michigan is the first state that will receive federal funds through the program, and will receive approximately $79.1 million to back small business loans.
The goal of the federal program is to help small businesses obtain loans of at least $10 for every $1 dollar the state provides in support, meaning the $80 million of federal funds will generate approximately $800 million of loans for small businesses that otherwise may not be able to get them.
“This is a big boost,” Snyder said.
Previously, the MEDC’s efforts have sparked loans of more than $191 million for small businesses on a public commitment of $20 million, which are expected to be recycled into the program with interest as loans are repaid. To date, the program has had no defaults and has generated an estimated 4-percent annual return for Michigan taxpayers.
Snyder, who served as the first chairman of the MEDC, thanked the organization for its effort.
"It's time to get the MEDC back to the basics of economic development so we can get people back to work," Snyder said.