Financial Assistance
Local Financial Assistance
A. Keweenaw Revolving Loan fund (KRLF)
The KRLF is owned and administered by the Keweenaw Economic Development Alliance (KEDA), and is capitalized with $135,000 of funds from the U.S. Rural Development Administration, Wal-Mart and matching funds from KEDA. The KRLF is designed as a "gap" financing instrument where other funding sources for a job-creating project are insufficient to cover all project costs. The KRLF provides loans to manufacturing, service and high tech companies in Keweenaw, Houghton and Baraga Counties that produce a product sold outside the area (thereby bringing in new dollars) or that produce a product currently being purchased outside the area (keeping dollars from leaving the area). Loans are normally from $15,000 to $75,000 depending on the financing "gap" and the number of jobs being created. The KRLF will consider taking a subordinate collateral position to other lenders as appropriate Loans can be for building, machinery and equipment and for working capital. Interest rates are according to the project risk, and loans are usually ballooned within 3-5 years. The KEDA Loan Committee meets as needed. Processing time from application to loan disbursement is usually a few weeks to 1 month. Contact Phil Musser (906-482-6817), KEDA Executive Director, for information or to apply.
B. Houghton County Revolving Loan Fund (HCRLF)
The Houghton County RLF has been active since 1988 and has a capitalization of $350,000. The Fund provides long-term "gap" financing for manufacturing, tourism or service sector projects that will create a significant number of permanent, well-paying jobs in the County. Specifically, it will provide up to one-third of total project funding or $15,000 per job created, whichever is less. The fund typically provides loans of $25,000-$100,000 for up to 15 years, often with balloon payments after three to five years. It loans funds at fixed rates from the current prime rate to 3 above prime, depending on risk. The Houghton County RLF Board is made up of seven members including two Houghton County Commissioners, an attorney, banker, accountant and two with small business backgrounds. The board meets on as needed basis. Because the State of Michigan overseas Fund activity and must review documents prior to lending, applicants should expect that the application process from application to closing will take 2-3 months. An applicant is requested to submit a business plan including historical and proforma financial statements. KEDA administers this fund. Phil Musser (906-482-6817) is the contact person for this fund, serving as both the County economic developer and as the RLF Secretary.
C. Superior Revolving Loan Fund (SRLF)
The SRLF is a six-county, Western Upper Peninsula fund that provides "gap" financing to manufacturing, tourism and service sector businesses within the 6-county Western U.P. region. It was begun in 1993 and capitalized at $250,000 using local funds and federal funds from the US Economic Development Administration. It will provide up to one-third of project funding or $10,000 per job created, whichever is less. Loan amounts are usually $10-75,000. It emphasizes semiskilled or skilled manufacturing jobs and gives priority to those projects offering a higher job/cost ratio. The ratio of private sector dollars to RLF funds must be a minimum of 2:1. The SRLF can provide loans for up to 15 years depending on use of funds. It can provide funds at interest rates from four percent above to four percent below the current prime rate. The SRLF Board is made up of 13 members, two from each of the six counties and one at-large member. It meets on an as-needed basis and usually requries 2-3 months to process a loan application. Contact either Phil Musser (906-482-6817), Executive Director of the Keweenaw Industrial Council, or Jim Stingle at the Western U. P. Planning and Development Region (906-482-7205).
D. Northern Initiatives Revolving Loan Funds
Northern Initiatives is a regional economic development organization based in Marquette, Michigan and provides loans to small businesses throughout the Upper Peninsula. Most start-up, newly established and growing businesses in the Upper Peninsula are eligible to apply, although preference is given to manufacturers, remanufacturers and service businesses. Funds can be used for working capital, equipment purchases, start-up costs, pollution control and abatement and other intermediate term needs. Interest rates charged are typically higher than bank rates. Northern Initiatives will loan from $10,000 to $150,000 or more depending on the project. Contact person is Scott Sporte (906-228-5571)
E. North Coast BIDCO (Venture Capital Firm)
This is a Michigan-licensed Business and Industrial Development Corporation located in Marquette, Michigan and serving the Upper Peninsula. North Coast may provide financing in the form of equity or loans. It is not limited to a particular industry, although it seeks financing opportunities where there is a high value-added component to the product or service. Financing ranges from $50,000 to $250,000. North Coast prices its financing according to the perceived investment risk. The contact person is Kathryn Polansky (906-228-6080).
F. Downtown Development Authorities (DDA)/Tax Increment Financing Areas (TIFS)
Both the cities of Hancock and Houghton have Downtown Development Authorities which have established TIFS in the downtown and other areas of the cities in which commercial and industrial growth is being encouraged. A TIF is a state financing instrument which allows a DDA to "capture" the city and county property tax growth that results from economic development in the TIF area. These "captured" taxes can then be used for infrastructure improvements in support of development projects including the acquisition and clearance of blighted land and buildings, site improvements to make land usable for new construction, street and utility upgrading, planning and engineering. Tax increment revenues can only be expended for public purposes and not as a direct loan to any private individual or company. To be eligible, a project must be located in the TIF district.
G. Industrial Development Districts/Tax Abatement
Many municipalities are willing to grant tax abatement of 50% of local taxes on real and personal property for up to 12 years. Tax abatement applies only to new manufacturing facilities, reuse of existing manufacturing facilities or to research and development facilities. In order to be eligible, the project site must first be designated as an industrial development district by the municipality. The business must then submit an abatement application to the municipality within six months of breaking ground or beginning rehabilitation in the case of reuse. The application must first be approved by the local municipality and is then submitted to the Michigan State Tax Commission to ensure that the correct process was followed. The contact person is Philip Musser, Keweenaw Economic Development Alliance (906-482-6817).
State of Michigan Financial Assistance
A. Small Cities Infrastructure Grants
The State of Michigan receives funds on an annual basis from the US Department of Housing and Urban Development to use to support manufacturing start-ups and expansions in the state that will create or retain jobs, and for economic development planning purposes. While formerly the state provided these funds as direct loans to expanding manufacturing companies, now the funds are provided as grants to municipalities to provide public infrastructure improvements necessary for the location, expansion or retention of a specific for-profit manufacturing business. Public infrastructure includes public water, sanitary and rainwater sewer lines, road construction or improvements, bridges and other public utilities. Minimum cost-per-job and private-to-public ration must be met. In addition, the local municipality must participate for at least 10% of infrastructure costs. The maximum grant amount is $500,000.
Economic development planning grants of up to $50,000 are available to municipalities to plan project-specific planning and design work which is likely to lead to an eligible economic development implementation project. Under this program, a municipality applies on behalf of a manufacturing firm to help that business plan a start-up or expansion project or to plan a relocation from another area. The initial contact person is Philip Musser, Keweenaw Economic Development Alliance (906-482-6817) who can provide access to State of Michigan personnel and municipal authorities.
B. Michigan Economic Growth Authority (MEGA)
MEGA is a new tax incentive program for companies that bring a large number of well paying jobs to Michigan. For a company that brings 150 new jobs from out-of-state, an in-state company that creates at least 75 new jobs or a Michigan company re-locating in a tax-free renaissance zone that creates at least 20 jobs, the company will receive a refund of its Single Business Tax for up to 20 years. The refund applies to the personal income tax withholding for the new jobs created and for the overall SBT liability attributable to the new project. A MEGA can also provide other incentives such as employee training monies. Michigan also offers High Tech Megas.
C. Charter One's Job Creation Loan Program
This state program is in partnership with the Michigan Economic Development Corporation. Below-market loans are available through this relatively new program. This program requires borrowers to create a minimum of one full-time job for every $40,000 borrowed at the fixed interest rate of 4.99% for the life of the loan. After 12 months, the offering rate for the program may be reset, and the new rate would be available for any loan booked in the second year of the program. The term of the loan will require that the specified jobs be created within three years after the funds are borrowed. These loans are for the purchase or upgrade of machinery and equipment, or building acquisition and remodeling. Contact Phil Musser to begin the process.
D. Michigan Department of Transportation (MDOT) Economic Development Funds
MDOT economic development funds provide funding for road projects related to specific business start-ups and expansions in manufacturing, agriculture or food processing, tourism, forestry, high technology research, and mining. Projects such as construction or improvement of access roads and paving of parking areas (if publicly owned) are included as eligible projects if needed to support the business expansion or start-up. The project must also create or retain permanent jobs, and all project funds must be committed prior to expenditure of MDOT economic development funds. . The Houghton County Road Commission is the applicant for these funds (Contact Person is Jim Manderfield, 906-482-3600).
F. Job Training Funds
The State of Michigan provides an extensive array of customized and off-the-shelf training programs for manufacturing and research and development companies which are expanding or moving into the state. The monies can be used for on-the-job training or for customized or standard training programs requiring instructors, training materials and supplies. This includes sending employees out-of-shop or out-of-state for specialized training. Michigan Technological University has been one source of trainers for local industry. The contact person for state training assistance is Cathi Cole, Michigan Jobs Commission (906-786-0842)
G. Invest Michigan Fund
This program is designed to grow the state's pension fund and invest in Michigan-based companies. The State of Michigan Retirement System has committed $300 million divided equally between a Growth Capital Fund, which will make direct investments targeting venture capital and expansion-state companies, and a Michigan Opportunities Fund which will target potential acquisitions and buyouts. The growth Capital Fund will be managed by co-general partners Beringea and Credit Suisse. The Michigan Opportunities Fund will be managed by Glencoe Capital. For more information, go to http://www.michigan.gov/gov/0,1607.7-168--197405--.00.html
H. Centers of Energy Excellence Program
The Centers of Energy Excellence, a $45 million program, will support the development, growth, and sustainability of alternative energy industry clusters in Michigan by identifying and/or locating a base company in a geographic region with the necessary business and supply-chain infrastructure. These centers will match the base company with universities, national labs and training centers to accelerate next-generation research, workforce development and commercialization. Grants will be made available to for-profit companies that meet the following criteria:
- Match a Federal, foundation or international investment;
- Accelerate the commercialization of an innovative energy technology or process; or
- Assist in activities of the center, including workforce development and technology demonstration.
For more informatiion, go to http://www.michiganadvantage.org
I. Michigan Pre-Seed Fund
The Michigan Pre-Seed Capital Fund supports high-tech start-up companies as they near commercial viability by providing access to early-stage capital to accelerate company development. These funds will extend the personal investment of entrepreneurs during the critical stage when they ae developing their businesses to the point of readiness for outside investment. These needs might include hiring key management executives or specialized consultants, regulatory review, contract manufacturing agreements, marketing stratetgies and sales plans, etc. At this stage, the Pre-Seed Fund will be able to fund $50,000 to $250,000 per company alongside their investment partner who will provide a minimum dollar for dollar match. The goal of the Pre-Seed Fund is to position these companies for follow-on investment. More information is available at http://www.annarborspark.org/business-resources/business-growth-expansion/pre-seed-fund/pre-seed-faqs/
J. Michigan Emerging Technology Fund
This program became effective January, 2008, and provides state matching dollars to federal SBIR/STTR awards to help companies bring their products to commercialization. More information is available at www.mietf.org
Federal Financial Assistance
A. Economic Development Administration (EDA) & Rural Community & Economic Development (RCED) Administration Infrastructure Funding
Both of these federal agencies provide infrastructure grants to municipalities to support manufacturing start-up, expansion or relocation. They do not have defined ratios that determine their maximum grant amount per project, but will typically come in for up to $750,000 per project, assuming the private sector investment is substantial and there is significant job creation. Processing times for grant funds can easily require 12-18 months to arrange. The RCED also loans funds to municipalities for infrastructure improvements in support of a specific manufacturing development. These funds are easier and quicker to obtain but, of course, must be paid back by the municipality. These programs are accessed through the respective state-level agency representatives. Phil Musser, Keweenaw Economic Development Alliance, can make these contacts and arrange for applications to be completed.
B. Small Business Administration 504 Program
This program is a fixed asset financing program which offers small businesses long-term, fixed rate loans at a below market rate. Generally, projects estimated to cost between $200,000 and $10 million are suitable for the program. Local lenders provide 50% of project financing which is secured by a first collateral at current market interest rates. The SBA provides up to 40% of the loan through the sale of debentures at less than market rate, and takes a second collateral position. The SBA debenture funds are fixed rate financing; 20 years for real estate and 10 years for equipment. The Michigan Certified Development Corporation located in Lansing complets all debenture paperwork, packages and sells the debenture. The remaining 10% is provided by the small business in the form of equity which need not necessarily be cash. The borrower must create or retain one job for every $50,000 of SBA financing. Thus, a borrower gets a blended interest rate that is lower than receiving only a bank loan, and gets long term, fixed rate financing. Any for-profit business whose net worth is less than $7.5 million and whose average profit after taxes is under $2.5 million for the previous two years is eligible to apply. Contact Jane Sherzer, President, Michigan Certified Development Corporation, at 517.886.6612, ext. 15, or go to www.michigancdc.org for current interest rates.
C. Small Business Administration 7(a) Guaranteed Loan Program
Loans are obtained from participating banks which then apply for an SBA guarantee of 90% on loans up to $100,000 and 80-85% of loans up to the maximum amount of $500,000. This program may be used in conjunction with the SBA 504 program above as a companion loan for working capital, although the SBA's total exposure may not exceed $500,000 for both programs. Loan maturities may go up to 7 years for working capital, 12 years for machinery and equipment, up to 20 years for construction and 25 years for real estate. Loans of up to seven years cannot exceed prime + 2 1/4%, and loans of seven years or more cannot exceed prime + 2 3/4%. Also, the SBA charges the bank a one-time 2% guarantee fee which is normally passed on the to borrower. The participating bank fills out and submits the guarantee application which is normally processed by SBA within 30 days or less.