Monday, August 1, 2011

The SBA Has a New Mezzanine Fund! - in Michigan

The Small Business Administration (SBA) recently announced its establishment of a new mezzanine fund (venture capital or private equity-like) Michigan. As the term "venture capital" implies, the fund invests in high growth companies based in Michigan.

According to the New York Times, the SBA and partners have committed $130 million to date. The partners and financial commitment breakdowns for this Michigan investment fund, called InvestMichigan! Mezzanine Fund are as follows:

$35 million through the investment fund of the State of Michigan Retirement Systems,
$15 million from Dow Chemical
$80 million from the SBA, in debt financing.

The InvestMichigan! Mezzanine Fund will invest $5 to $15 million in approximately 20 companies "that either do business or have a substantial presence in Michigan or are poised to relocate there."

So you don't have to be currently headquartered in Michigan to pursue investment by this fund. But you do need to generate significant revenue or employ a large number of people in Michigan in order to qualify. Alternatively, you can have an imminent plan to relocate there. So if you were looking for a place to relocate but weren't sure, I'd say this is an excellent reason to choose Michigan, assuming you aren't moving from someplace hot like Texas and can brave the cold!

Since much of the investment provided to the companies will be in the form of debt financing (hence the name "mezzanine fund"), the companies will need to have a track record and the operational cash flow to pay make the the interest payments on the investment. The companies will have the following basic criteria (in addition to the above location-based requirement):

  • Be a revenue-generating larger small businesses or medium -sized companies with revenues of >= $20 million
  • Be profitable with net income of $3 to $5 million

For more information, here's the SBA contact info.: Hayley Meadvin (202) 205-6948; Dennis E. Byrne (202) 205-6567

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