1. Be Prepared for Potential “Stimulus” Funds

There has been a lot of talk on the news about the possibility that the federal government may pump a lot of money into the local economy in order to stimulate economic growth. At this time, it’s anyone’s guess as to how that will happen and the types of projects that will receive funding. Some of the funds may be funneled through existing federal agencies and programs that help to finance infrastructure projects (roads, water, sewer, etc.) Without having a crystal ball, local governmental bodies and their staff can try to get ready for any eventuality by doing the following:

          • Determine what infrastructure projects are most needed in your community.
          • Determine the projects’ scope. Get an engineer’s preliminary drawing and cost estimate.
          • Identify potential sources for local match.
          • Prioritize which projects are most critical and why. Focus on projects that will create or retain
             jobs, lead to private investment and increase the local tax base.
          • Garner support for your top projects from other organizations/agencies.  Letters and
             resolutions of support show there is community consensus for your projects.
          • Be flexible and ready to alter your project in order to meet the requirements of the funding 
            agency.

2. Local Lenders Gather to Discuss Credit Situations

Over 50 bankers, alternative lenders, small business advocates and counselors came together in three different round table meetings to discuss the small business credit situation in northern Michigan. The meetings took place over two days in Cheboygan, Petoskey and Elk Rapids.

The objective of the meetings was to collectively discuss how we can continue to proactively ensure that small businesses have access to the right form of capital to continue to grow, thrive and create jobs. The need for ready access to capital is and always will be important for economic growth.

The discussion was opened with comments on the latest headlines in the media on the credit crunch, liquidity “crisis’ and the federal bail out of the banking system. Is what we are reading in the headlines myth or reality surrounding small business access to capital?

Bankers from 5/3, Chase, National City, First Community, Citizens National, Northwestern, Charlevoix State, Citizens, Huntington, were asked to comment on underwriting standards, what has changed or is changing in the loans they are seeing and what they foresee taking place over the short term – next 12 months. Many agreed that although underwriting parameters and definitions have not changed, the scrutiny new loans are now receiving is making lending tougher. There isn’t as much “stretching” of the parameters and guidelines now. For good strong borrowers, it is business as usual. Such things as personal credit score, always an important consideration in underwriting business loans, is seeing a higher target score requirement. Start up business loans may be harder to get from conventional bank sources. SBA and USDA requests have slowed significantly in recent months- a sign that fewer new business loans are coming through the participating banks. More time is being invested on existing customers and existing loans to ensure solid portfolios. Much of the competitive pressure in the industry to get deals done is now gone and the industry is back to building on the fundamental and more conservative underwriting standards of a decade ago. As one banker so eloquently put it - “It’s a new day”.

Regarding the Fed actions and stimulus to help the liquidity crisis in the financial market, many reflected that it will ultimately help free up capital but most could not hazard a guess as to when we might feel the impact.

Representatives from the SBA, USDA, Northern Initiatives, Michigan Certified Development Corporation, Economic Development Foundation, Northern Michigan Foundation, Target Alpena, Greenstone Credit Services, and Northern Shores Loan Fund discussed their programs and structure, and how they can help support and work with banks to bolster bank loans. An access to capital grid was shared with all participants outlining the various program highlights for future reference. New connections were made between the conventional bankers and alternative lending partners. They now have contacts they can work with to ensure that good business loans continue to get done.

Small business advocates were on hand to discuss what they are seeing and hearing from small businesses, including chamber directors (Elk Rapids, Cheboygan, Indian River, East Jordan, Charlevoix, Boyne City and Petoskey), SCORE representatives, Small Business Technology Development Center counselors and private consultants. Excellent comments included a concern about the “lack of concern” on the part of some small businesses that perhaps aren’t planning proactively enough for the future economic downturn. Others commented that there are pockets of really good things happening with small businesses, including those that have a very good niche market, value added agricultural products and have adapted to a diversified business model, may be better situated to thrive in the future.

3. Michigan Business: Surviving to Thriving (MB:S2T)

Michigan Department of Labor & Economic Growth Director Keith W. Cooley (DLEG) announced a partnership with the University of Michigan for an expansion of the "Michigan Business: Surviving to Thriving" (MB:S2T) program. The program will transform at-risk small and mid-size Michigan businesses so they are not only able to compete in today's global marketplace but continue to expand and contribute to the state's economy in the years ahead.

"The purpose of 'Surviving to Thriving' is to build a statewide system to support Michigan businesses and provide them with tools to develop solutions for global competitiveness, minimize the number of at-risk businesses, prevent business closures, downsizing and layoffs," Cooley said. "Through this partnership we will also help businesses thrive by improving their profitability and overall efficiency while also investing in Michigan's economic future."

DLEG's Bureau of Workforce Transformation is partnering with UM-Ann Arbor's Institute for Research on Labor, Employment, and the Economy through 2011 as part of DLEG's No Worker Left Behind initiative. No Worker Left Behind, which started in August 2007,and MB:S2T are part of a comprehensive plan to transform Michigan's economy. Both initiatives are employer-driven, and will capitalize on training to meet the needs of Michigan's employers. No Worker Left Behind provides up to two years of free tuition at any Michigan community college, university, or other approved training program. MB:S2T will address the training needs of Michigan's incumbent workers.

"Our team will be working very closely to develop a comprehensive industry specific strategy for success so we need 100 percent commitment from our business partners. Our first step is to conduct a very thorough on-site assessment which will involve everything from review of financial records, productivity and efficiency of the workplace, customer satisfaction and diversification, to sales and marketing, evaluation of the executive team and training of staff and new hires," said Marian Krzyzowski, Director of UM's Institute for Research on Labor, Employment and the Economy. "The entire process is intensive, however for many of these businesses it can mean the difference between shutting down the business forever or reaching their true potential and contributing to our state's economy."

For more information, please contact: Marcia Black-Watson, DLEG Bureau of Workforce Transformation Deputy Director-Employers, at 517-335-5858 or Steve Wilson, UM's Project Manager/Director for MB:S2T, at 734-998-6221 or sbwilson@umich.edu.

4. Credit Markets Vital to Financing of Entrepreneurial Startups

Contrary to widely held beliefs that startup companies rely heavily on funding from family and friends, a Kauffman Foundation research paper reported that external debt financing such as bank loans are the more common sources of funding for many companies during their first year of operation. According to The Capital Structure Decisions of New Firms, nearly 75 percent of most firms’ startup capital is made up in equal parts of owner equity and bank loans and/or credit card debt, underscoring the importance of liquid credit markets to the formation and success of new firms. The paper also found that high-tech firms receive more than four times the amount of outside equity investments in their first year of operations than other firms. The research paper is the second in a series of Kauffman Firm Survey studies of nearly 5,000 businesses founded in 2004. Click here for The Capital Structure Decisions of New Firms or more information about the Kauffman Firm.

5. New MSU Center to Turn Waste to Energy for Small Farms

NLEA is fortunate to have a long-standing partnership with Michigan State University. This allows our clients to access information and technical assistance to make their businesses, communities, and lives more rewarding.

A recent example of some of the ways the University is working to assist small farmers are in their efforts to develop farm size bio energy projects. State and foundation grants exceeding $3 million will assist Michigan State University researchers in developing technology for smaller farms to turn animal waste into usable heat, electricity and other valuable products. MSU’s planned Anaerobic Digestion Research and Education Center will consolidate new and existing programs in a planned 3,280-square-foot building south of campus, at MSU’s expanding farm animal and environmental research complex.

The MSU ADRE Center will develop ways to efficiently convert manure liquid into methane for heat and electricity while extracting fiber for soil enrichment or ethanol manufacture and water for irrigation. Other valuable output could include animal feed and algae, which can be processed into biofuels.

For more information please visit: MSU College of Agriculture and Natural Resources

6. Upcoming Trainings and Workshops

December 10:  How to Become a Government Contractor

January 7, 14, 21, & 28:  Power of Lean Series

January 31: 10th Annual Northern Michigan Small Farm Conference

Click here for a complete listing of events.

7. Cool Websites & Links

Save money on your commute!

NFIB: The voice of small business

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