The Lending Tree

Illustration by Jacqui Oakley

(page 1 of 5)

At a recent Goldman Sachs conference, Stephen D. Steinour — chairman, president, and CEO of Huntington Bank based in Columbus, Ohio — was asked where he would invest money if he had his pick of any place in the United States. “I said Michigan, and even the guys that were sleeping woke up,” Steinour says.

Asked to elaborate, Steinour described a scene from a strategic retreat in Troy that was attended by Huntington’s leadership. “Some of our board members were skeptical about our expansion into Michigan, but after a number of CEOs came through and made presentations, including (Amway President) Doug DeVos, it turned out to be a seminal moment,” he says.

“It was just unbelievable to hear the depth of commitment and the hopes and aspirations for the state. You have a lot of multigenerational families that are incredibly passionate about their businesses. I can tell you we don’t see that same passion in many other areas of the country. Michigan has hit bottom, and it’s coming back.”

As the state strives to rebound from the loss of thousands of jobs and population over the last decade, no one is breaking out the champagne. Still, it’s clear, even among outside economic observers, that Michigan has emerged from “recession” into “recovery,” although it hasn’t yet reached the “expansion” phase.

Sophia Koropeckyj, a managing director at Moody’s Analytics in West Chester, Pa., says a number of positive signs, including employment and investment statistics, convinced her in March to officially upgrade Michigan’s status. “Employment began to turn around in Michigan in the second half of 2009,” she says. “Through March 2011, the state has made up 10 percent of the jobs it lost since 2000,” she says. “It’s got 90 percent more to go before one can say it’s actually in an expansion.”

Koropeckyj says personal income in Michigan rose 2.8 percent in 2010, after dropping 3 percent in 2009. Personal income has been steadily driven by transfer payments (unemployment insurance claims, Social Security, etc.) since 2008, but wages are now trending upward because more people are back to work. Lower unemployment (10.3 percent in early 2011 vs. 14 percent in 2009), and growth in industrial production and applications for residential building permits, also is a positive sign. “This is a cyclical rebound from the very deep recession. We’ve actually seen retail spending improving and retailers expecting better conditions this year,” Koropeckyj says.

Another sign that may foretell a healthier economy is the increasing number of loans approved by banks across the state that are guaranteed by the U.S. Small Business Administration. SBA loans, which are underwritten by the United States government and targeted at companies with a maximum
net worth of $15 million, or $5 million net income (averaged over two years), generally fall into three categories:

— Under the 7(a) Loan program, the SBA guarantees up to 85 percent of loans up to $150,000, and 75 percent of loans from $150,001 to $5 million.

— The 504 program guarantees 40 percent of a project up to $5 million, with the bank and borrower making up the balance.

— Short-term Microloans, which are now limited up to $50,000.

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