As published by Annalise Frank, Crain’s Detroit Business

  • Started in 2012 by Michigan Economic Development Corp., Michigan Strategic Fund and Michigan banking community
  • Approved Tuesday for $9.6 million award through state to start second fund, Grow Michigan II
  • Offers subordinated debt, chiefly to Michigan businesses in manufacturing, technologies

The Grow Michigan lending fund is getting a twin with $9.6 million in financing through the state.

Grow Michigan was launched in 2012 through the Michigan Economic Development Corp., Michigan Strategic Fund and Michigan banking community to offer subordinated debt to small businesses.

The state wants to continue supporting its style of assistance as demand for it remains strong, said Grow Michigan CEO Patrick O’Keefe.

Grow Michigan was approved Tuesday for a state award to create a second fund called Grow Michigan II. It’ll still need banks to sign on and wouldn’t start operating until 2019.

The second iteration would be similar to the first. It supports entrepreneurs and small businesses looking to grow — often those who don’t have the liquidity to finance expansion on their own or with just a traditional bank loan. The subordinated debt works in conjunction with traditional bank loans. The money must be invested in Michigan and generally goes to manufacturing, technologies and similar fields.

“The state would generally like to see more manufacturing jobs,” O’Keefe said. “They don’t restrict us too much … They don’t necessarily want us to invest in casinos, entertainment or kind of the soft industries. They like manufacturing a lot.”

The first Grow Michigan fund, with participation from 19 banks and the Michigan Strategic Fund, was recently given a two-year extension through 2019. It has provided 30 companies loans totaling $56.2 million, helped create around 3,500 jobs and secured around $304 million in investment for business projects, according to an MEDC memo and O’Keefe. Its average loan is around $2 million, he added. It has closed two deals this year, has two more expected to close in the next week and another nine in the pipeline for this year, O’Keefe said.

“The fund, historically, has only made three to four loans a year,” he said.

For its second loan fund, Grow Michigan aims to raise $50 million-$60 million. It’ll be looking for banks to participate, likely marketing around the end of the year. Most of the new $9.6 million state award goes toward loans, but $100,000 is for start-up expenses.

Grow Michigan operates with five staff and expects to take on around three more with the new fund.