There is some great news about Michigan, in case you haven’t heard: Small business is back.
According to one indicator, Paychex/IHS Small Business Jobs Index, Detroit is No. 2 in the U.S. in terms of job growth rates. Additionally, Michigan ranks second in terms of small business employment.
Another indicator that more growth is on the way is that small businesses are borrowing to launch and expand their companies. In turn, those businesses will create jobs and further improve Michigan’s business outlook. The Small Business Administration reported that its lending has been strong in the state in recent years, and Michigan ranks second in the country for the number of the most common SBA loan, the SBA 7(a).
That’s significant not only because the lending activity points to growth and new startups among Michigan small businesses, but also because prior to 2011, the state had never ranked higher than fourth in the country for the number of SBA 7(a) loans.
These loans are vitally important to the small business community. They can be used to start a new business, or to acquire or expand an existing one. They allow community banks to offer options that they wouldn’t otherwise have. It’s particularly relevant since the Great Recession, when small businesses were hurt because their assets and collateral (traditionally their real estate) values declined, making even healthy businesses fall outside the traditional “credit box.”
SBA loans have become more accessible and flexible in recent years. The SBA has increased the maximum loan to $5 million, expanded the definition of small business to allow more businesses to take advantage of the programs, and offered fee waivers (currently loans under $150,000 have no guaranty fee, plus reduced fees on larger loans to veterans), etc.
Meanwhile, they have significantly simplified the application process with even more exciting changes on the horizon.
It’s clear there is a big demand for SBA loans from both borrowers and banks. In response, the SBA has made significant changes in recent years to make it simpler to use their programs. In short: This is not your mother’s SBA, and that’s very good for businesses in Michigan.
Rob Farr is president and CEO of Bank of Birmingham in Birmingham.