A pure connection between small business and Michigan
Pure Michigan Business Connect, a $3 billion public-private initiative announced by Gov. Rick Snyder in early June to help grow the state’s “economic garden,” is already getting a lot of involvement from small businesses looking for employee talent and capital.
The alliance of private corporations — including Huntington Bank and Varnum — with the Michigan Economic Development Corp., plus other state agencies and business support organizations, is now “the cornerstone of a new toolkit for economic gardening,” according to Snyder.
Huntington, which volunteered to be a partner in Business Connect and made a commitment to make up to $2 billion in commercial and small business loans in Michigan, had fielded 34 loan “opportunities” as of mid-June, and 24 of those involve small businesses, according to Jim Dunlap, senior executive vice president of Huntington Regional and Commercial Banking and president of the bank’s West Michigan Region.
“We brought this to the governor. This was not a request by the administration” or the MEDC, said Dunlap.
Varnum LLP has committed to donating $1 million in legal services to targeted Michigan-based startups, early stage and growing businesses, in a coordinated effort to help spark the Michigan economy.
Varnum, which calls its five-year program MiSpringboard.com, estimates it could serve about 60 organizations a year, according to Managing Partner Larry Murphy.
Pure Michigan Business Connect matches people with resources, strengthening relationships to fuel economic growth. Other initial participants include Consumers Energy, DTE Energy, Stage 2 Innovations, Automation Alley, Export Import Bank and economic development partners who joined with the MEDC in making the announcement at a news conference during the Mackinac Policy Conference, sponsored by the Detroit Regional Chamber.
For its part, the state government “eliminated the jobs killing Michigan Business Tax and replaced it with a simple, fair, flat 6 percent Corporate Income Tax,” according to the governor’s announcement. Nearly 100,000 small and medium businesses “will no longer be taxed twice and will simply pay taxes on their business profits.”
The MEDC is offering $100 million in economic development incentives, and $25 million for entrepreneurship and innovation programs that provide capital and support services to early stage Michigan businesses. The MEDC Michigan Collateral Support and Loan Participation programs are offering $80 million to generate an additional $800 million in Michigan bank loans for business.
Consumers Energy and DTE Energy each will dedicate an additional $250 million over five years to purchase goods and services from Michigan-based suppliers.
Stage 2 Innovations, based in Troy, is a private investment group headed by former Chrysler Corp. CEO Tom LaSorda and working in conjunction with Automation Alley, a nonprofit economic development organization that covers Wayne, Genesee, Livingston, Macomb, Monroe, Oakland, St. Clair and Washtenaw counties. They have pledged $100 million for a second-stage fund for Michigan businesses with innovative technologies to accelerate large-scale commercialization of those developments.
Export Import Bank of the United States has committed to work with Snyder and the MEDC to more than double the value of its investment deals with Michigan-based small businesses — to $187 million by 2015, compared to $75 million in 2009. In addition, Ex-Im is pledging to do a Global Access for Small Business Forum in Michigan.
At the June 2 announcement at the Mackinac Policy Conference, Michael Finney, MEDC president and CEO, said the event was “an invitation to Michigan’s business community, companies that have supply needs or funds to lend and those that are looking for new opportunities,” to join Pure Michigan Business Connect.
“Transforming Michigan’s economic ecosystem requires the broad involvement of our state’s business community — our largest, most prominent companies along with the newest and least known and those of all sizes and sectors in between — working with local and state economic development agencies,” said Finney.
Dunlap said that the business situation in Michigan has been “perceived to be worse” than it really is, and that there have been “self-confidence issues” here due to “the external world” perpetuating that image of Michigan.
Huntington is based in Ohio and active in seven states, and Dunlap said he sees “the deal flow” throughout them all.
“Michigan has continuously been one of our very, very productive and attractive markets to do business in,” said Dunlap.
Last September, the board of Huntington’s holding company, Huntington Bancshares Inc., met in southeast Michigan and Dunlap brought in CEOs from a dozen Michigan companies who took turns explaining their visions of the future of Michigan. After that, the board was left with no doubt that “Michigan has a future in mind for itself,” said Dunlap.
Then they met with then-candidate Rick Snyder, campaigning for the governor’s office. Dunlap said Snyder described a “very compelling change of course” for Michigan government if he was elected, including a dependence on “many more robust private-public partnerships” and a de-emphasis on state aid, subsidies and tax abatements for business.
Dunlap said the board told Snyder that if he was elected and delivered on his promises, Huntington would quickly join in and provide partnerships and commitments “to advance an agenda.”
“The small business environment in Michigan, in particular, is extraordinarily opportunistic,” said Dunlap. “There are lots of small businesses here, and obviously they are the predominant source of the employment growth.”
About $1 billion in loans will be targeted to small business and the other $1 billion will be targeting mid-size to larger companies, according to Dunlap. Some of the larger amounts will range from $10 million to $25 million and will be designed to encourage manufacturing job growth, in particular.
“We are going to work directly with the MEDC,” said Dunlap. “They are our partner in all of this, to make sure the right clients are attracted” and that promises and commitments will be tracked.
“I want to be very clear about something else: We are going to be diligent in our underwriting. There are no favors or gifts or look-the-other-way components as to how this money is going to be lent,” said Dunlap. Business plans and quality of management will be studied by Huntington, “making sure that there is the ability to repay” and collateral.
“It’s priced aggressively and we’ve virtually eliminated any of the bank fees on the larger pieces of all this, so it’s an attractive package in total,” said Dunlap.
Murphy said the legal aid being offered by Varnum will depend on the type of business, but will generally include advice regarding organizational structure, creation or review of contracts and licensing agreements, and perhaps also include employee-related issues such as benefits.
“It could certainly include technology issues,” he added, such as software contracts and agreements — “those sorts of legal issues that brand new companies face and sometimes try to address on their own.”
Murphy said Varnum’s research in working up to the Pure Michigan initiative revealed that many startups, “because of the cost of initial legal services, would rather devote those resources to the actual business,” such as marketing and production.
“The individuals who run these starts-ups feel that they can do without the legal component, but the problem in foregoing legal assistance early on may manifest itself later,” he said.
The state of Michigan also has a Contract Connect website that provides information on more than 1,000 state contract opportunities, along with instructions on how to register and bid on these contracts. The website also offers the MiDEAL program, an opportunity for Michigan local units of government to benefit from the state's negotiating and purchasing power by permitting them to purchase from state contracts with the same terms, conditions and prices as the state. The website is www.michigan.gov/micontractconnect