Capital Access Program Information for Lenders

By providing loan enhancement up-front, the MEDC Capital Access Program reduces the risks lenders face when lending to small businesses.

What is Capital Access?

MEDC partners with lenders of all sizes to provide financing support so they can provide loans to small businesses in their communities and across the state. Capital Access programs reduce the risks lenders face when lending to small businesses by providing loan enhancement up-front. The lender can then in turn provide access to capital that wouldn’t traditionally be available.

What are the benefits of working with MEDC’s Capital Access team?

Capital Access provides loan enhancement to lenders to be more comfortable lending to small businesses and allows them to be more active with small business in their community. By working with MEDC, lenders can provide traditional loans to small businesses that they otherwise would not be able to provide.

Michigan’s Loan Enhancement Programs

Program	Borrower Need	Program Financing Tool	Eligibility
Capital Access Program CAP Fact Sheet	Capital needs and credit enhancement needs	Similar to a loan loss reserve fund, MSF pays a small premium into a pooled reserve (2-7%) matching the combined contribution from borrower and lender. This pooled reserve grows with every transaction, providing increased benefit to the lender over time. Master Agreement with MSF required. View template here.	New extension of credit 500 employees or less Loans up to $5M
Collateral Support Program CSP Fact Sheet	Collateral shortfall	Cash collateral deposits covering all or a portion, up to 49.9 percent of a loan, of a calculated collateral shortfall as described by the lender. The cash is deposited into an interest-bearing account held by the lender and will be pledged as collateral on behalf of the borrower. View template Cash Collateral Agreement here.	New extension of credit 750 employees or less Loans of $500,000 or less regardless of industry, loans can exceed this if operating in qualifying industries²
Loan Guarantee Program LGP Fact Sheet LGP Program Overview	Inability to obtain adequate credit or adequate terms	MSF provides a partial guarantee up to 80% of each loan. Exposure with each lender is capped at 25% of total enrolled loans. Master Agreement with MSF required. View template here.	New extension of credit Loans of $250,000 or less Businesses with less than 250 SEDI businesses³
Loan Participation Program LPP Fact Sheet	Cash flow shortage	MSF purchases a portion of the loan (pari-passu), up to 49.9 percent, from the lender. Optional grace period on the program’s portion of the loan for up to 36 months can be applied. View template Loan Participation and Serving Agreement here.	New extension of credit 750 employees or less Loans of $500,000 or less regardless of industry, loans can exceed this if operating in qualifying industries²

Notes: [1] All of these programs cannot be used the finance the unguaranteed portion of an SBA loan. [2] Qualifying industries: mobility, manufacturing, professional and corporate services, medical device technology, engineering, design and development, high tech, agribusiness, tourism, logistics, and financial services. [3] A SEDI business owner includes, but is not limited to, minority and women-owned business enterprises, service-disabled veteran-owned businesses, and veteran-owned businesses located in communities that are economically distressed.

Michigan’s Mezzanine Debt Program

Program	Borrower Need	Program Financing Tool	Eligibility
Grow Michigan II, LLC Grow Michigan II Brochure	Need for attractively-priced subordinate loan to address growth/transition	Supported by MSF, the Grow Michigan Fund provides attractively-priced and complimentary growth capital in the form of subordinated debt. 5-year loan term with up to 1-year interest only. Value-add assistance is included via an Advisory Board. Financial institutions may participate as investors in the Fund and/or senior lenders.	Typical loan size between $250,000-$5M Small and middle market businesses $3-50M in revenues Positive EBITDA Typically, but not limited to, manufacturing, distribution, transportation, life sciences and enabling technology

Additional information about the Grow Michigan Fund can be found here: https://www.growmichiganfund.com/. Email contact: [email protected]

Private Activity Bonds (MSF-Issued)

Program	Borrower Need	Program Financing Tool	Eligibility¹
Private Activity Bonds Private Activity Bonds Fact Sheet	Financing public purpose projects	MSF issues private activity bond and lends bond proceeds to borrower. This provides firms with capital cost savings stemming from the difference between taxable an tax-exempt interest rates. View private activity bond application here.	Maximum bond size of $1M or $10M ² Public purpose projects include manufacturing projuects, non-for profit corporation projects, solid or hazadrous waste disposal facilities projects

Additional information about MSF-issued private activity bonds can be found here: https://www.michiganbusiness.org/services/access-capital/small-business/
Email contact: [email protected]

Notes: [1] Michigan Strategic Fund is responsible for issuing bonds in the category of “Small Issue Manufacturing and Exempt Facilities Projects” while the Michigan State Housing Development Authority (MSHDA) is responsible for issuing bonds in the category of “Single & Multi Family Housing and Mortgage Credit Certificates”. [2] The maximum size of bonds is limited to: (1) $1 million free of any restrictions on capital expenditures; or, (2) $10 million subject to the condition that the company’s total capital expenditures in the locality over the period of three years before and three years after the date of issuance do not exceed $20 million.

Additional Information & Documents for Capital Access Programs

Collateral Support Program

The intent of the Collateral Support Program is to supply cash collateral support to lending institutions to enhance the collateral coverage of borrowers. This support, maintained in an account at the lending institution may cover all or a portion of a calculated collateral shortfall as described by the lending institution, up to 49.9% of the total loan amount. Lenders that have a borrower with a collateral shortfall will apply for coverage through the MEDC, which provides the administrative services for the program for the Michigan Strategic Fund (MSF). If approved, the MSF will deposit the cash into an interest-bearing account with that lender, which will then be pledged as collateral on behalf of the borrower.

For more information, please review the documents below:

Loan Participation Program

The intent of the Loan Participation program is for MEDC to partner with lenders to finance projects when faced with borrowers whose projected cash flows are considered speculative by the lender. The program will purchase a portion of a loan from the lender, thus decreasing the exposure that the lender has to that borrower. The program has the option, based on a review of the borrowers historical and proforma financial statements, to offer a deferment on repayment of the program’s portion of the loan for up to 36 months. Participation is advantageous to lenders as it limits the project exposure of lenders, and it offers borrowers “free cash flow” during the grace period allowing full coverage on the lender’s portion of the loan.

For more information, please review the documents below:

Loan Guarantee Program

The intent of the Loan Guarantee program is for MEDC to partner with small business lenders, generally providing loans of $250,000 or less, to support new lending. The program mitigates a portion of the risk associated with small business lending by providing a partial guarantee to a qualified lender on new financing provided by that lender. The inclusion of the guarantee is intended to allow the small businesses to obtain financing that would not otherwise be available under conventional terms.

Capital Access Program

The Capital Access Program (CAP) is an innovative program available to assist businesses with capital needs. The CAP uses small amounts of public resources to generate private bank financing, providing small Michigan businesses access to capital that might not otherwise be available.

Participating banks throughout Michigan have offered CAP loans directly to companies that need credit enhancement. Similar to a loan loss reserve fund, the bank, the company and the MSF pay a small premium into a reserve that makes it possible for the company to receive fixed asset and working capital financing.

CAP loans can be long- or short-term, term loans or lines of credit as determined by the lender. The bank has the flexibility to recast, extend or refinance the loan to address the needs of the business owner.

For lenders interested in participating in the Capital Access Program, access the factsheet and agreement document below:

Grow Michigan II, LLC

Grow Michigan II, LLC, is capitalized by members of Michigan’s banking community and the Michigan Strategic Fund. It provides attractively priced growth capital in the form of subordinated/mezzanine debt to the Michigan small business community.

Grow Michigan’s target loans are to profitable small businesses with strong management teams committed to excellence.

For more information, visit: https://www.growmichiganfund.com/
Download the Grow Michigan II brochure

Contacts at MEDC

For more information on these programs and to learn how your lending institution can get involved, please find program contact information below:

Chris Cook, Program Director
Amber Westendorp, Debt Programs Specialist
Rachel Bakken, Senior Capital Project & Portfolio Manager

SSBCI 2.0 Update:

In June, U.S. Treasury changed a key rule for the SSBCI 2.0 loan enhancement programs. Based on this change, the MEDC may now support new lending, which will refinance existing debt of a third-party, non-affiliated lender. This change is valid across all MEDC loan enhancement programs. MEDC believes that this change will greatly impact its ability to support small business lending in Michigan. Lenders may contact Chris Cook, Managing Director, Capital Access for more information: [email protected].

SSBCI 2.0 Access to Capital Overview Webinar

The Michigan Department of Insurance and Financial Services (DIFS) and MEDC partnered for an informational webinar which provided small business lenders with an overview of MEDC’s SSBCI 2.0 Access to Capital programs. The webinar featured opening remarks from DIFS Director Anita Fox as well as an in-depth overview of programs and requirements, lender and small business borrower eligibility, and was followed by a Q&A session.

Watch the full webinar here or view the presentation here.

SSBCI 2.0 Frequently Asked Questions

What is SSBCI?

SSBCI stands for the State Small Business Credit Initiative, which is a federal program designed to increase the availability of capital through lending or investment to small businesses. All programs under SSBCI are designed to leverage private sector investment and decision-making.

SSBCI was initially created in 2010 in response to the Great Recession and the lack of liquidity available for lending to small businesses. Today, the program is being reimagined as SSBCI 2.0 to address the economic impacts of COVID-19 having resulted in strained cash flow and disparities in recovery and lending efforts. Key customers of SSBCI funding include manufacturers, Main Street businesses, service providers, early-stage tech businesses, very small businesses and socially and economically disadvantaged individuals.

SSBCI 2.0 Number of Programs:

Capital Access
Loan Participation
Collateral Support
Loan Guarantee
Venture Capital
Technical Assistance

SSBCI 2.0 Participating Lenders:

Regional and Community Banks
Minority Depository Institutions
Credit Unions
Microlenders
CDFIs

SSBCI 2.0 Target Customers:

Manufacturers
Service Providers
Main Street
Early-Stage Tech
Very Small Businesses
Socially and Economically Disadvantaged Individuals (SEDI)

What are the definitions of a small business, very small business or socially and economically disadvantaged individual?
SSBCI 2.0 includes requirements for support to small businesses owned by socially and economically disadvantaged individuals (SEDI) and to very small businesses (VSB).

Small businesses are those defined by the Small Business Administration as having 500 employees or less.
VSB businesses are defined as those with 10 employees or less.
SEDI businesses are defined as small businesses owned by individuals that have faced barriers to accessing the capital markets and networks they need to grow their businesses because of certain statuses or membership in certain groups, including membership in a group that has been subjected to racial or ethnic prejudice or cultural bias within American society. It also refers to small businesses in CDFI Investment Areas, which are generally low-income, high-poverty geographies that receive insufficient support for the needs of small businesses, including minority-owned businesses.

SSBCI 2.0 Loan Programs

What is the purpose of the SSBCI 2.0 loan programs?
SSBCI is intended to increase capital availability to small business. The programs are designed to allow private sector lenders to provide loans to small businesses that would otherwise not be available under conventional terms.

Does the MEDC provide loans directly to small businesses through SSBCI?
No. A loan must be provided by a bank, credit union, or community development financial institution (“CDFI”).

Is grant funding available through SSBCI 2.0?
No. The programs only support increased availability of loans. All funding is expected to be repaid.

How does a small business apply for SSBCI 2.0 lending support?
A small business will need to identify a bank, credit union, or CDFI that is interested in providing a loan. The lender, in turn, applies to MEDC for SSBCI support.

When will applications for SSBCI 2.0 loan programs be available for small businesses and very small businesses?
MEDC’s loan enhancement programs, including collateral support, loan participation, loan guarantee and capital access, are currently available using SSBCI 2.0 funds for businesses seeking support of more than $250,000. To learn more about MEDC’s Capital Access program visit michiganbusiness.org/access-capital.

Within the next 60 days, funding will also be available for loans of $250,000 or less for small businesses, with a focus on businesses owned by socially and economically disadvantaged individuals or businesses with fewer than 10 employees. Applications for these loans will go through specified lenders, rather than directly through MEDC. MEDC will share more information when those applications are available.

SSBCI 2.0 Small Business Venture Capital Program

What is the purpose of the SSBCI 2.0 Small Business Venture Capital Program?
The intent of the Small Business Venture Capital Program is to increase the availability of capital to early-stage technology-based small businesses headquartered in the state of Michigan. The program seeks to leverage private sector capital by making investments into Venture Capital Funds actively investing in the state of Michigan.

Will the MEDC invest SSBCI 2.0 Venture Capital funds directly into small businesses?
No. These funds will be invested into qualified VC firms in a Limited Partner arrangement. Please refer to The MVCA Michigan Entrepreneurial & Investment Landscape Guide for a comprehensive compilation of angel organizations, venture capital firms, entrepreneurial support organizations, and service providers active in Michigan’s growing entrepreneurial and investment community.

Questions?

Please direct all questions to [email protected].