Small businesses in the United States will get $10 billion in funding from the State Small Business Credit Initiative (SSBCI) to assist them with post-pandemic recovery. Funding is extremely limited, so small business owners need to be quick and learn as much as they can about how the program works in their state.
The Michigan Economic Development Corporation (MEDC) has been approved for $237M in funding. Click here to see all 50 states and where they stand on SSBCI.
📍 If you're in a different state, you can add your email here to be the first to know when your state opens up applications.
What SSBCI Funding Will Be Available for Michigan Businesses?
The amount of SSBCI funding available and how it can be distributed will vary from state to state. In Michigan, there are currently four ways that Michigan businesses can access SSBCI funding:
The Collateral Support Program is a federally-funded initiative that allows suppliers to access financing for approved projects that might otherwise be unavailable due to collateral shortfall. The program provides pledged cash collateral accounts to lenders to achieve this goal.
💡 The application window is currently open. To apply, potential borrowers must first fill out an application with a lending institution. Then, they must fill out the Michigan Loan Enhancement intake form and the MEDC background check form.
The MEDC Loan Participation program was designed for lenders to finance projects that involve borrowers whose future cash flow is uncertain. The program buys a portion of the loan from the lender, which in turn decreases the amount of risk exposure for that particular borrower.
Venture Capital Fund
This equity program aims to provide venture capital funding to early-stage companies operating primarily in advanced manufacturing, medical and medical devices, aerospace, and high tech. Funding will be provided through U.S. Securities and Exchange Commission (SEC) qualifying funds operating in Michigan.
❌ Applications are not being accepted at this time. MEDC plans to announce an open application to venture capital funds later in the year. All applications will need to go through the participating venture capital firms, not through MEDC.
Loan Guarantee Program
The Loan Guarantee Program's main objective is to provide additional funding for small businesses that need under $250,000 or less in new lending. The program will be accessible statewide, and a system of Community Development Financial Institutions (CDFIs) will significantly contribute. MEDC's Capital Access team will regularly give updates as CDFIs, and other certified small business lenders join the program.
❌ Applications are not being accepted at this time. Small business owners who are interested in the program should look for updates from MEDC later this year.
Which Businesses Qualify for SSBCI Funding in Michigan?
Before you spend hours applying for small business funding via one of the available programs, pre-qualifying yourself is essential. The good news is that eligibility requirements are fairly inclusive, especially for loans under $500,000.
The kinds of businesses that are eligible include:
- For-profit corporation
- Government-owned corporation
- Nonprofit institutions of all kinds
- Limited liability company
- Joint venture
- Sole proprietorship
- Consumer or marketing cooperative
Loan Participation Program Eligibility
Loans under $500,000: No industry requirements except for those included in the Michigan Strategic Fund Act and the SSBCI guidelines (see above).
Loans over $500,000: Additional industry requirements apply. The borrower must operate primarily in one (or more) of the following industries:
- Professional/corporate services
- Medical devices
- Financial services
Like we mentioned earlier, each qualifying business must also be engaged with a private lender to participate in the program. That way, they can gain the extension of commercial credit they need.
To be eligible for the loan guarantee program, the borrower must have no more than 750 employees (no matter the loan size) and otherwise comply with all state and federal requirements for the program.
Collateral Support Eligibility
Eligibility for Collateral Support is a bit trickier. It is still relatively inclusive, but there are a few more caveats to consider.
Loans under $500,000: No industry requirements except for those included in the Michigan Strategic Fund Act and the SSBCI guidelines.
Additional industry requirements apply. The borrower must operate primarily in one (or more) of the following industries:
- Professional/corporate services
- Medical devices
- Financial services
Similar to all SSCBI funding, businesses must be engaged with a private lender that agrees to extend commercial financing to the business. Up to 49.9% of a new extension of commercial credit may be supported.
The maximum participation is capped at $5,000,000 and cannot be used to support any individual extension over $20,000,000.
In the case of Collateral Support, the entirety of proceeds from the loan must be used for business purposes in the State of Michigan.
What Can Businesses Spend SSBCI Funding On?
- Working capital
- Equipment and inventory
- Start-up costs
- Term loan financing
- Lines of credit
- Trade cycle financing
- Purchase or construction renovations of non-passive real estate
What Can't Businesses Spend SSBCI Funding On?
- Passive real estate investment
- Speculative activities, gambling
- Pyramid sales
- Activities prohibited by Federal or State law.
How to Apply for SSBCI Funding In Michigan
The application process varies from state to state, but the one constant is that you apply through a lending institution, not the government.
In Michigan, however, the process is fairly similar across different types of funding:
- Find a private lender to engage with
- Get in touch with your chosen lending institution and let them know you're interested in applying for funding through the Small Business Credit Initiative.
- Complete Michigan's SSBCI program intake form.
- Obtain credit approval documents from the participating lender. (Provided by the bank)
- Fill out MEDC background check forms.
- Submit the required documentation.
Before getting the process started, it is best to have the following documentation as this is what is typically required:
- Cover letter
- Business plan
- Legal photo ID
- 3 months of personal bank statements
- 3 months of business bank statements, if available
- Personal Cash Flow Form
- Use of Funds Form
- Personal Financial Statement
Applying for SSBCI Funding Is Not Without Its Challenges
Gathering the necessary materials, keeping everything in order, and navigating through portals is tedious and cumbersome even for the savviest business owners. We're speaking from experience – it took us days to gather all of the necessary information to write this post.
- Application and background review forms weren't available where we thought they'd be.
- SSBCI funding information was siloed across multiple websites.
- Background review forms were only available in person.
- Government sites showed vague or conflicting information.
- Limited information exists on other sites regarding this brand-new program.
- The overall process is less straightforward than that of the EIDL or the PPP.
But, we made sense of it all, and now you don't have to! You're welcome. 😉