Democratic Gov. Jennifer Granholm unveiled new plans last month to stimulate Michigan’s economy by providing financial assistance to small business owners — and local business owners and experts say they think her plans will be beneficial, but more assistance is still needed.
One of Granholm’s new programs is the Michigan Small Business Financing Alliance, a consortium of 30 credit unions that have agreed to make $43 million in capital available to small businesses. In addition to the Financing Alliance, Granholm also announced that the state would provide funding for the FastTrac program, which offers aspiring entrepreneurs the opportunity to learn how to start their own businesses.
According to Ann Arbor business owners and experts, the Financing Alliance and FastTrac programs will ease the financial strain local businesses are feeling from the economy, in addition to encouraging new startups.
The Financing Alliance intends to help current small business owners and aspiring entrepreneurs by giving out loans that average about $20,000.
State Sen. Liz Brater (D–Ann Arbor) said in an interview last month that she thinks the Financing Alliance will bring some much-needed help to small businesses in Washtenaw County during a tough economic time.
“I think at this point in time it is a very important proposal,” Brater said.
Tom Porter, adjunct lecturer of Entrepreneurial Studies in the Ross School of Business, also said he believes the program will be beneficial for businesses because many small businesses are having trouble obtaining credit in the current financial crisis.
“Throughout the country in the last couple of years, all businesses have found it difficult to obtain credit,” Porter said. “(This program) seems like a program designed to help smaller businesses get the kind of credit that they probably used to get from their banks.”
Brater said she has heard from many small business owners in her district who are having problems obtaining loans.
“(Small business owners) have cash flow issues, and this program is designed to help give relief to small businesses that are having trouble getting their loans that they used to get quite routinely (and) are now drying up,” Brater said. “I think this a good proposal and will be effective.”
Amer Bathish, owner of Amer’s Deli, said he likes the concept of the Financing Alliance, but $20,000 is not enough money to help an established business like his.
“I would need more for float money, like $50,000 to $100,000,” Bathish said. “$20,000 will not take you far.”
Bathish said if he received a loan from the Financing Alliance, he would use the money to make improvements in his restaurants instead of hiring more employees.
Bathish said government assistance to Ann Arbor businesses should help with sky-high rent costs because he and other local business owners are paying large sums on rent.
Bathish said he is paying $15,000 a month for his State Street restaurant location and compared the price to rent in downtown New York City.
“The rent in this town is absolutely ridiculous,” he said. “Why are we paying Manhattan rent for little Ann Arbor?”
He added that unlike New York, Ann Arbor businesses only make revenue when students are in town, which is only seven months out of the year.
Village Apothecary owner Garry Turner said the Financing Alliance program is a “step in the right direction” and that he would consider taking a loan from the program for his drug store. But he said the program is not enough, adding that he thinks public policies should focus on relieving the tax burden on small businesses.
“I think there are a lot of businesses, small and large, in the state that are holding back hiring right now because there are a lot of costs involved,” Turner said.
Turner suggested that the state should provide a tax credit for each newly hired employee to help offset the cost of training and new payroll taxes — an idea he thinks would help both current businesses and aspiring entrepreneurs.
Kyle Mazurek, vice president of government affairs for the Ann Arbor Area Chamber of Commerce, which recently merged with the Ypsilanti Area Chamber of Commerce, said he also thinks that reforming taxes is a necessary step to help small businesses, but that lawmakers should take a different approach.
“The goal of many state-wide, small business associations is to develop a more competitive tax structure,” Mazurek said.
Mazurek said he knows many small business owners are concerned about taxes — citing the 22-percent surcharge on the Michigan Business Tax as a primary concern.
But Porter, the lecturer, said he thinks reducing the tax burdens on small businesses is unrealistic given the state’s current economic situation.
“Reducing the tax burden (on business) is always a good idea, but given the realities of our governments … we have to be honest about their financial condition and where they’re going to get the capital to meet all the needs of the citizens,” he said. “I don’t think it’s realistic to think about reducing taxes.”
Porter added that the lack of access to credit — which is what Granholm’s program is aiming to address — hampers small businesses from expanding more than the burden of taxes.
Mazurek, the official from the Ann Arbor Chamber of Commerce, said he also thinks unobtainable credit is specifically preventing small businesses from expanding, but that the Financing Alliance program will “significantly improve small business access to capital.”
“One of the barriers is access to capital, and (businesses) are finding that traditional institutions just don’t have capital available to them or aren’t willing to lend it,” Mazurek said.
Mazurek added that he hopes Financing Alliance “will be a win-win for small businesses” and that Ann Arbor area businesses will take advantage of the program.
In addition to the Financing Alliance, Granholm announced state funding for FastTrac, which will be run by The Ewing Marion Kauffman Foundation in partnership with Wayne State University’s TechTown program. It’s expected that the program will be offered at 12 small business assistance centers throughout the state.
Michigan Economic Development Corporation — an organization created through a partnership between state and local governments — is expected to provide $200,000 for 1,000 entrepreneurs to attend FastTrac.
Brater said FastTrac will help to expand start-up companies in Washtenaw County, adding that the program will also benefit the area’s universities.
Mazurek said he thinks FastTrac is the type of program that is necessary to help rebound Michigan’s economy.
“The conventional wisdom at the Chamber (is that) the key to Michigan’s economic recovery is going to be jump-starting our entrepreneurial spirit and encouraging small businesses’ growth,” Maurek said. “My understanding of this program is that it is designed to do exactly that by giving would-be entrepreneurs the training they need to be successful.”
But some, like Porter, still believe Granholm’s initiatives to help small businesses don’t go far enough to create new jobs and transform Michigan’s economy.
“Public policy must aim to replace (the lost jobs) and creating a new economy in Michigan,” Porter said. “I think if we’re trying to replace the automotive companies that have pulled out of the state, and if we’re to be competitive as a state … we need to have a knowledge-based economy to establish new companies and industries, and Michigan will need much more substantial programs than (those outlined by the governor).”