EAST LANSING, Mich. — Small businesses – the primary source of new jobs in Michigan – need better access to loans in order to grow and spur economic growth, according to a new report from Michigan State University’s Center for Community and Economic Development.
The number of small business loans under $100,000 dropped nearly 20 percent between 2007 and 2010 in Northern Lower Michigan, the study found. While the report looked specifically at a 21-county region, it’s relevant to all rural areas in the state, said project director J.D. Snyder.
Among the report’s recommendations: Banks should relax lending restrictions that were tightened in the wake of the financial meltdown and economic downturn of 2008-09.
“Startup companies and small businesses have suffered the most from not being able to get credit because they rely on that credit to hire new people and expand,” said Snyder, a researcher with the CCED. “As a result, economic growth in rural communities continues to be choked.”
The CCED will explore the issue during an April 26 conference at the Kellogg Center called “Moving Michigan Forward: Improving Rural Small Business Capital Access to Create New Jobs.” Lt. Gov. Brian Calley is scheduled to give the keynote address.
The 132-page report, funded partly by the U.S. Department of Agriculture’s Rural Business Enterprise Grant Program, surveyed small businesses and lenders in a large area that includes Traverse City, Gaylord and Alpena.
Business owners said obtaining loans was their biggest barrier to growth, while lenders said many of the businesses lacked sufficient knowledge of lending requirements and recordkeeping to make successful loan applications.
In addition to relaxing lending requirements, recommendations in the report include:
- Small business owners should get more help with loan applications. Snyder said help is available at Michigan’s Small Business and Technology Development Centers, located around the state, but many new businesses aren’t aware they exist. Staffing at the centers was doubled recently under the federal Small Business Jobs Act, he noted.
- Loan application procedures through the Small Business Administration and the U.S. Department of Agriculture should be streamlined.
- A state loan fund should be considered for business lending. This state-backed program could include loans for riskier businesses and loans that can take longer to start paying back. Snyder said North Dakota runs a state loan fund.
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