Sitting atop the northern border of the United States, the families of Michigan’s Upper Peninsula can feel a world apart from the rest of the state and the country. Surrounded by three of the Great Lakes and only connected by land to neighboring Wisconsin, Upper Peninsula residents live with the challenges of distance, isolation and seasonality – along with the changing dynamics of the global economy – resulting in stagnant business growth and economic decline.
However, an innovative lending partner in the region – Northern Initiatives – is making connections that others will not, investing in small businesses and providing the resources they need to start and grow, sparking local economies and creating much-needed jobs for local families. As a community development financial institution (CDFI), Northern Initiatives is committed to developing economies across northern Michigan.
“We make loans in high potential entrepreneurs that banks can’t do, won’t do or shouldn’t do,” said Dennis West, president of Northern Initiatives. West added that Northern Initiatives is a community development lender that can make investments in rural communities to businesses that might not otherwise be bankable, due to things like lack of previous experience, credit problems or sufficient capital. In fact, many of our clients have been referred to us by community bankers.”
Business and industry in northern Michigan is in transition. Extractive industries, like mining and logging, are declining in employment, while small businesses are on the rise. The growing trend for fresh, natural, local and authentic products is opening new markets for retailers and technology is connecting them to a global market. At the same time, access to capital for entrepreneurs, especially those wanting to build innovative concept businesses or located in sparsely populated rural areas, is limited due to underfinancing by traditional financial institutions.
That’s the critical funding gap that Northern Initiatives has bridged since 1991. Serving a total of 46 rural Michigan counties and five in Wisconsin, the financial institution is bringing not just financial capital, but knowledge and expertise to help “mom-and-pop” businesses become employers and economic drivers. With the help of a $2 million program-related investment (PRI) from the W.K. Kellogg Foundation (WKKF) as part of its impact investing portfolio, the lender has been able to make capital even more affordable for 12 businesses in communities where median incomes are lower than the national average and where poverty rates are higher.
Leveraging funds from WKKF’s PRI, Northern Initiatives was able to access a program from the U.S. Small Business Administration that makes capital even more accessible for Michigan businesses. Because of this, loans of less than $250,000 can be made at lower interest rates and over a longer period of time, putting the loan recipients in a better position to successfully grow and repay the loan.
According to West, WKKF’s PRI “is an impact investment for us. We’ve had a dozen opportunities where we can make larger loans to customers that help support job creation.”
One such example is Roaming Harvest in Traverse City, Michigan, owned by husband-and-wife team Simon Joseph and Rebecca Brown. They received a microloan from Northern Initiatives to open a mobile food truck offering local and healthy food options. Their menu, comprised of foods raised or made by local businesses and sustainable farms, was so well received that they quickly built a huge fan base and customer demand necessitated the need to grow. Taking advantage of the new loan product from Northern Initiatives, Roaming Harvest accessed a low-interest $125,000 investment to help retire debt and get equipment needed to open their own brick-and-mortar restaurant in addition to the food truck.
Roaming Harvest owner Joseph said the investment not only helped their business grow but it has directly impacted others. “We deal directly with local farms, culinary artisans, cheese makers, bakeries,” Joseph said. “So the access to capital actually trickles down from one business into another and helps a whole region.”
Northern Initiatives has been able to make investments in a wide range of businesses, manufacturing firms, banks, educational institutions, nonprofits and other small businesses – with very strong success rates. In Marquette, Michigan – Northern Initiatives’ hometown – the Marquette Food Co-op is bringing fresh, healthy, locally grown and produced products to one of the Upper Peninsula’s largest communities.