Northern Lights - Issue 14 - October 2022
LENDERS TEAM WITH VENTURE NORTH FOR SMALL BUSINESS WINS
By AMY LANE
At times, they’re unseen funders, supporting Venture North Funding & Development programs and in turn, northwest Michigan small businesses.
And, they’re lending partners, joined by Venture North to finance deals that help entrepreneurs buy, start, grow and expand businesses, retaining and creating jobs.
They’re financial institutions – including banks and credit unions -- with a stake in the success of the region. And through varied relationships, they help make possible what Venture North, a Community Development Financial Institution, does.
Partners for a Community Pillar
Take Fifth Third Bank. Every year since 2017, Fifth Third has contributed $10,000 or more to Venture North – grants that add up to $80,000 through 2021 and have helped Venture North build the capacity of its programs and offer services to small-business clients.
The funding’s helped pay for contractors who provide technical assistance like financial planning, business and marketing plan development, grant writing and loan application packaging – free consulting services for businesses that have been Venture North loan clients as well as newcomers that are seeking financing and need to prepare.
Money has also gone toward Venture North outreach and presentations to partners who may know of businesses that need financing in the rural and low- to moderate-income communities in Venture North’s ten-county service area.
Autumn Gillow, Fifth Third’s northern Michigan market executive based in Traverse City, said that between the bank and Venture North, there’s mission fit.
“Economic development is a key pillar that we’re always looking to invest in, in the communities that we serve. And Venture North more than fulfills that mission, contributing to economic development in the community,” she said.
Gillow said investing in Venture North enables the bank to support startups and small companies that traditional lenders like Fifth Third sometimes aren’t able to service.
Venture North is “vitally important to the economic foundation of our community. They serve a great gap in the market; they’re doing a great job. Not just from a capital perspective, but from a consulting perspective,” she said.
And beyond Fifth Third’s funding, there’s loan underwriting guidance. Two Fifth Third veterans, portfolio managers Jim Masters and Dustin McKellar, have for years been on Venture North’s loan committee, Gillow said. “The insight and experience that Dustin and Jim bring to the table, is really immeasurable,” she said.
“Fifth Third has been a terrific partner,” said Laura Galbraith, Venture North president. “We’ve shared clients in deploying loan capital, made referrals to one another and they have consistently provided critically important funding for operating our programs. They are in tune with the region and we share interest in working at the grass-roots level to know and understand the businesses and communities we serve.”
There’s also a connection between Fifth Third and Venture North that stretches back to before Venture North even existed.
In 2013, Fifth Third and the Traverse City Area Chamber Foundation launched a $100,000 loan fund to provide small businesses ready access to startup or seed money. The Sub Micro Loan program, funded by a $50,000 grant from Fifth Third and $50,000 from the chamber foundation, offered short-term loans of up to $7,500 with a quick turnaround time for loan review and funding – a program designed to help the smallest of businesses grow, targeting capital needs that fell below the standard thresholds of commercial financing.
The revolving fund deployed $126,500 to 17 businesses and all but two are still in business, reports Venture North, which was incubated by the Traverse chamber and inherited the portfolio.
“I would say that’s definitely good success,” Gillow said. “Especially when you think about prior to this fund, there wasn’t a lot of resources for these small, startup companies to go to. They wouldn’t qualify for conventional financing…there was a gap in the market.”
The Sub Micro Loan fund was a predecessor to Venture North’s current Micro Loan Fund, which assists businesses from pre-startup through one to two years in operation. Some of the businesses originally served by the Sub Micro Loan fund remain clients of Venture North today.
Meeting Shared Needs Together
Support for Venture North has also come from Huntington National Bank, donating a total of $18,000 over the last three years, through 2021. And now, nearly doubling that contribution, is a newly approved $15,000 grant – a reflection of Huntington’s desire to expand and deepen its relationship with Venture North, said Jennifer Jones, Huntington senior vice president and community president for the greater Grand Traverse region.
“They play a significant role because they help to serve a segment of business owners that need it, and they can deploy…not just capital, but also the technical support,” Jones said. “We view their work to be a critical component to the success of our region.”
She said Venture North aligns with Huntington’s strategic community plan, which is “designed to foster financial opportunities for people, businesses and communities served by Huntington. And by doing that, we focus on small business loans, increased access to capital for historically disadvantaged or low- to moderate-income communities.
“So it’s a natural synergy because of our mission, to partner with an entity like Venture North.”
Huntington dollars have provided foundational support for Venture North programming, such as the team of consultants who help businesses and provide technical assistance, including under the Regional Resiliency Program COVID relief initiative that Venture North launched in 2020.
The bank has also partnered with Venture North on educational programming, like an access to capital webinar for Venture North clients in which a Huntington manager presented general financial information and financing options available through CDFIs and traditional lenders.
Jones said Huntington views its overall partnership with Venture North as one that benefits business, community and region. “When we’re able to help and partner with an organization like Venture North that provides alternative financing, when those startup or entrepreneur businesses might not qualify for conventional financing…(it) strengthens the economic development in the region.
“We’re not looking for a particular return on investment, but rather that we see our region continue to thrive and grow, because we’re committed to the communities they (Venture North) serve.”
Galbraith said Huntington Bank “has taken a real interest in our goals and programs. They are loyal supporters of our priorities as a Community Development Financial Institution.
“By working together, we can do an even better job of marshaling our collective resources to reach businesses with underrepresented owners and those operating in areas of economic distress. Part of the solution is to share in ensuring our financing capital is effectively reaching ‘capital deserts’ that have lacked services for years.”
Jones said CDFIs like Venture North “are great resources for small businesses and entrepreneurs that are looking to start or grow a business. It should be a team effort to strengthen and grow our communities, and we think it’s a great resource for all financial institutions to consider investing in.”
Small businesses aided by Venture North may also grow to a point where they can then turn to bigger institutions for financial assistance. “What’s best for our region, is that new businesses that need alternative financing grow and succeed,” Jones said. “The fact that they come to a bank for traditional financing is just a result of their success. It means that we’ve helped contribute to the success of new businesses in our region.”
More Tools, Partnerships and Wins
As a lending partner, Venture North can fill a gap between what a business needs and what a traditional lender may be able to provide, said Steve Brower, Venture North business development specialist and retired vice president and commercial loan officer for West Shore Bank.
He said Venture North can take a secondary position behind the primary lender and loan money on collateral “that might not be acceptable for the primary lender,” such as inventory. Venture North works with entrepreneurs to help them finance, expand or buy into a business and can tailor its assistance to individual needs -- in one recent instance, for example, helping to finance the down payment requirement of the lead bank.
“Our terms are quite flexible,” Brower said. “And we try to structure the loan to the needs of the borrower.”
For example, he said, “if it’s a new business, we might allow interest-only payments for several months. And then principal and interest (combined payments) would start once their business cash flow stabilizes.”
With a new business, he said, “you just don’t know how quickly that first customer is going to come in the door” or how many customers there will be. “It’s a constant concern, having cash flow to pay all the bills.”
As a partner, Venture North helps the primary lender leverage its dollars to ultimately get the borrower the full amount they need, Brower said. And Venture North’s involvement can open the door to valuable resources and technical assistance for loan clients – from areas like marketing and accounting to basic items lenders look for, such as business plans and cash flow projections.
“We have the time and experience to offer the people the technical assistance that they need to make themselves presentable to a lender,” he said.
It’s among the benefits that partnering with Venture North brings to the lending world, said Brower, who came to the CDFI – a community-focused alternative small-business lender -- from a 43-year career in commercial banking.
“I would like to encourage lenders, if they don’t know about us, give us a call. Our toolbox is full of various tools and resources that we can offer to their customers to help them,” he said.
“Having us on board might be the difference of making a loan, or not making a loan. And if you don’t make a loan, maybe we all lose, including the borrower, the lender, Venture North and the community.”
Amy Lane is a veteran Michigan business reporter whose background includes work with Crain Communications Inc., Crain’s Detroit Business and serving as Capitol correspondent for nearly 25 years. Now a freelance reporter and journalist, Lane’s work has appeared in many publications including Traverse City Business News.
