Access to capital remains one of the most common challenges facing small and mid-sized businesses. Even profitable companies can struggle to secure traditional financing when collateral falls short of lender requirements. Michigan’s Collateral Support Program offers a practical solution designed to bridge that gap and help businesses move forward with confidence.
Administered through the Michigan Economic Development Corporation and supported by the Michigan Strategic Fund, the Collateral Support Program provides cash collateral deposits to participating lenders. These deposits help offset a borrower’s collateral shortfall, reducing risk for the lender and increasing the likelihood that a loan can be approved.
How the Program Works
The program can provide cash collateral support of up to 49.9 percent of a new loan. These funds are not issued directly to the borrower. Instead, they are deposited into a designated interest-bearing account held by the lender. This structure strengthens the overall collateral position of the loan while maintaining a partnership between the lender and the business.
The program is intended to support new lending, including financing for equipment purchases, fixed assets, working capital, and business expansion. Rather than replacing private financing, it enhances it by working alongside traditional lenders.
Fees and Structure
There are costs associated with participation. A closing fee ranging from 1 to 2 percent of the support amount is charged to the lender. In addition, there is a 1 percent annual fee on the outstanding balance of the collateral support. These fees are typically factored into the overall loan structure.
Who May Qualify
The program is generally available to small and medium sized Michigan based businesses that demonstrate viable operations but lack sufficient collateral to fully secure financing. Eligibility specifics are evaluated in coordination with the lender and program administrators.
Why It Matters
For many growing companies, the difference between expansion and stagnation can be access to capital. The Collateral Support Program helps reduce barriers by sharing risk and encouraging lenders to approve loans that might otherwise fall outside standard underwriting guidelines.
Businesses or lenders interested in exploring this option can contact the MEDC at [email protected] for more information.
If your business is considering financing and collateral is a concern, this program may be worth discussing with your ShindelRock team as part of your broader funding strategy.
