The Michigan Economic Development Corp. is exporting its business expertise to the Commonwealth of the Northern Mariana Islands.
The MEDC has established a reputation for being a leader in creative small business lending. It’s assisted other states, and now it will help establish a $13.1 million program in this U.S. territory located in the Pacific Ocean.
The program is aimed at helping small businesses gain access to credit.
So how did Michigan get involved in the business of an obscure Pacific island?
Back in 2009, the MEDC created loan enhancement programs, where it used $30.9 million in state funds to either purchase a portion of a small business loan or provide collateral.
The statewide program helped leverage 51 loans for $214.2 million.
The MEDC helped small business borrowers in one of two ways: one, it would purchase a portion of the bank note and offer a grace period for the principle and interest on that portion, making it easier to pay the bank portion of the loan in the short term. Or it provided collateral in an effort to combat falling property values.
“We created them in the depth of the recession because lending was frozen in the state,” said Paul Brown, MEDC’s vice president of capital markets.
The programs caught the attention of the U.S. Treasury, which used them as a model to launch the State Small Business Credit Initiative in 2010. The federal program offered $1.5 billion to help states and territories spur small business lending.
Michigan received the first federal allocation of about $79.1 million. Since July 2010, it has dispersed $40.2 million, leveraging $221.7 million in nearly 300 private loans. The program has brought in $6.2 million in fees, interest and return of principal. None of the loans have defaulted.
Brown said the MEDC helped more than half of the states apply for the funds and design their programs.
For the complete story, click here.