WEST MICHIGAN — When it came time for a Standish-based plastic molding company to grow, the company went looking for a loan to finance an expansion. But the firm didn’t qualify for a loan because of a lack of adequate collateral, the result of the recession that pushed down the valuation of many companies.
The solution for Vantage Plastics came via a Michigan Economic Development Corp. program that supports the collateral needs for businesses seeking credit, which enabled the company to secure a loan from Fifth Third Bank. The transaction is one of many Fifth Third has conducted as part of Pure Michigan Business Connect, an initiative by Gov. Rick Snyder and the MEDC to get Michigan businesses doing more business with each other.
Fifth Third to date has funded $40 million in loans for 40 companies alone through the MEDC collateral support program. They are deals the bank otherwise may not have done, given the tight federal regulations right now over commercial lending and collateral requirements, said Tim Doyle, Fifth Third’s senior vice president and business banking manager in West Michigan.
“They would have been harder transactions to get done,” Doyle said. “We’ve been somewhat handcuffed through regulatory channels.”
Participation in the MEDC collateral program is one aspect of Fifth Third’s broader role and its $2.5 billion, three-year commercial commitment made a year ago to Pure Michigan Business Connect. The amount was about 25 percent higher than what Fifth Third loaned to businesses in Michigan in the prior three years, Doyle said at the time.
The bank to date has surpassed 80 percent of the $2.5 billion commitment and is well ahead of expectations, Doyle said. Fifth Third is 30 percent of the way to another $2.5 billion commitment made in November 2011 for consumer and mortgage lending.
Huntington Bank, which committed $2 billion over four years to small business lending through Pure Michigan Business Connect, said in June it had originated more than $1.5 billion in loans to more than 2,500 business.
Doyle partly credits Fifth Third’s commercial loan volumes through Pure Michigan Business Connect to the state’s improved economy, especially in the manufacturing sector where companies are making capital purchases, acquisitions and facility expansions. Fifth Third’s overall commercial lending in Michigan is running about 30-percent higher in 2012 than in 2011, he said.
“It’s very positive,” Doyle said.
The partnership with the state has exceeded expectations for the Cincinnati-based Fifth Third, which is working to expand the model to other states such as Ohio, Illinois and Florida.
“The momentum we’ve made in Michigan — others states are seeking to leverage that,” Doyle said. “We’re taking this model on the road.”
Key to the model is the MEDC’s referral of companies seeking assistance for an expansion or securing the capital or credit they need to grow.
Doyle recently detailed the program at a U.S. Department of Treasury conference in Chicago on sharing best practices to improve access to credit for businesses across the nation. His primary message in his presentation was for both the public and private sectors was to “put down silos” and to look at how they can work together.
Banks need to get more innovative as well in how they approach the market, Doyle said. Given the depth of Michigan’s economic troubles, the Pure Michigan Business Connect program and partnership with the state was an opportunity that Fifth Third welcomed.
“This is the best situation for Michigan, if we’re working together,” Doyle said. “Banks have to change. What we realized in the last four years is we have to be more innovative because the customers’ needs are changing as well.”