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Michigan, the Great Lakes State, offers an attractive environment for small businesses. Its moderate corporate and personal income tax rates combined with a reasonable cost of living make it easier for entrepreneurs to startup businesses and attract employees. The good news is that Michigan has a wide range of lenders who are standing ready to finance aspiring small-business owners.
Although Michigan businesses operate in a moderate-cost environment, they occasionally need outside capital to fund a startup or, if they are an existing business, to finance expansion and growth.
The Small Business Administration (SBA) partially guarantees loans made by lenders to small businesses. This guarantee makes SBA loans popular with small business owners because they usually come with low interest rates, since they are less risky for the lender.
Businesses that experience a seasonal buildup in receivables and inventory can use revolving lines of credit to finance temporary cash flow deficits.
Businesses use term loans to finance projects, like a plant expansion, or for an acquisition that require larger amounts of money. These loans are usually repaid over several years and can come with either a fixed or variable interest rate.
You can use an equipment finance loan to pay for an expensive piece of machinery rather than paying the full price upfront. These loans are repaid in installments over several years.
Accounts receivable financing is a good way to speed up your cash flow. Lenders will use the receivables as collateral and make advances against your invoices as they are created, and you don’t have to wait for your customer to pay to receive your funds.
Michigan has many commercial banks, credit unions and nonprofit organizations that offer loans to small businesses.
The Huntington Bank also known as TCF Bank, is one of the nation’s leading lenders for SBA loans and has branches located throughout the state of Michigan and the Midwest.
Michigan First Credit Union Is a nonprofit membership-oriented organization that provides loans to its customers at lower rates and fees than other commercial lenders.
Opportunity Resource Fund provides loans to small businesses throughout the state of Michigan for working capital, inventory financing, business expansion and other short-term capital needs.
The Small Business P2 Loans program is managed by the Michigan Department of Environment and provides loans that are used for projects that increase sustainability, reduce waste, and conserve energy.
Michigan Economic Development Corporation matches small business owners with lenders who can provide start-up capital and expansion.
Detroit Development Fund provides financing, training and consulting to businesses owned by entrepreneurs of color.
Invest Detroit is a mission-driven lender, investor and partner that supports businesses and growth in Detroit and the surrounding area.
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In addition to state and local organizations that promote small businesses, nonprofit SCORE has several offices in the state to provide mentoring to aspiring entrepreneurs. The SBA also steps in with its Small Business Development Center to provide advice and make suggestions with preparation for financial planning and funding. The state-funded Michigan Economic Development Corporation stands ready to provide even more business resources and suggestions for financing small businesses.
If you think your business may qualify for a grant, you can start your search at the federal site Grants.gov. For grants more specific to the state of Michigan, you can visit the Michigan Labor and Economic Opportunity site which describes grants to small businesses for specific purposes, such as building up exports.
The Michigan Business Development Program offers grants and other economic assistance to businesses that create qualified new jobs — 25 in rural areas and 50 in standard areas.
Motor City Match offers grant funding of up to $100,000 to new and expanding businesses in Detroit.
Motor City Restore – now part of Motor City Match – offers grants of up to $25,000 to cover 50% of total project costs for improvements to business storefronts.
The first step is to decide on your business structure. You can start out as a sole proprietorship and you’ll need to register the name of the business with the county of operation. If you decide on a corporation or a Limited Liability Corporation (LLC), you need to register your company with the Michigan Secretary of State. You’ll also need to check local and state regulations to see if you need any specific permits or licenses.
After taking care of the paperwork, you need to prepare the documentation that your lenders require. Typically, you’ll need a business plan, financial statements, and cash flow projections. Your financial projections should show why you need the loan and how you intend to pay it back.
The type of loan depends on its purpose. If you have a seasonal business and experience temporary increases in accounts receivable and inventory, a revolving line of credit will likely work. If you’re looking to purchase a piece of equipment, equipment financing could be a good fit. The financial consultants at online platforms like Lendio can give you advice and help you decide in just a few minutes which loan works for your situation—and at no cost to you.
Banks and nonprofit organizations in Michigan want to provide funds to small businesses that increase economic activity in their communities. Everyone gains when new businesses startup and existing businesses expand and add more employees. The availability of funds for small businesses to finance their operations is critical for the growth of local economies.
An SBA preferred lender is a lender that’s been approved by the Small Business Administration to administer SBA loans without additional approvals from the SBA. Typically these lenders have years of experience and can approve SBA loans faster than non-preferred lenders.
SBA loans are backed by the government and offer lower interest rates than other types of small business loans. They typically require a minimum time in business of two years and a credit score of 650+.
An SBA 7(a) loan is a form of financing that is partially guaranteed by the SBA. These loans are named after article 7(a) of the Small Business Act of 1953, which launched the SBA and tasked the agency with supporting American small businesses through lending. You can learn more about the SBA 7(a) loan on our blog.