Frequently Asked Questions – Northern Initiatives

Northern Initiatives is a Community Development Financial Institution. We’re in business to provide loans and business services to small business owners and entrepreneurs who create jobs and enable the communities of Michigan and neighboring Wisconsin to thrive.

What is a CDFI?

A community development financial institution (CDFI) is a private financial institution that provides loans to small business owners, entrepreneurs, and community organization that might not qualify for loans for banks for a variety of reasons. Many times, lending is focused on low-income, disadvantages, and underserved communities. CDFIs are certified by the Community Development Financial Institutions Fund (CDFI Fund) at the U.S. Department of the Treasury, which provides funds to CDFIs through a variety of programs.

How is Northern Initiatives different from a Bank?

NI provides loans to small business owners, entrepreneurs, and community organizations that might not qualify for loans for banks for a variety of reasons. NI does not offer banking products such as deposit accounts or home mortgages. NI is able to devote more time and attention to helping a small business owner succeed in his or her community. Northern Initiatives (NI) is a non-profit Community Development Financial Institution (CDFI). A CDFI has a primary mission of community development, serves a target market, is a financing entity, provides development services, remains accountable to its community, and is a non-government entity.

What is Northern Initiatives role as a Michigan Manufacturing Technology Center (MMTC) affiliate?

Northern Initiatives is part of a statewide network that works with Upper Peninsula Manufacturers to support their growth and profitability. NI conducts and arranges for consultations that support a business to improve costs, quality and efficiency.

Business Loans

What types of loans do you offer?

Northern Initiatives provides business loans to existing and start-up companies. Loans range from $1,000 to $1,000,000 in size, with terms ranging from 3 to 7 years for working capital and equipment loans and 10 to 25 years for loans related to renovation and purchase of commercial real estate.

What is the Regional Revolving Loan Fund?

The Regional Revolving Loan Fund (RRLF) serves businesses that generally don’t qualify for traditional financing. Loans typically support equipment purchases, working capital, or construction for new or existing businesses. Northern Initiatives administers these funds for 21 communities throughout Michigan. Go to the Business Loans page to learn more about applying or contact your local NI Lender directly.

Do you fund start-up businesses?

Yes, around 1 in 3 loans disbursed are to start-up businesses. A business plan is required for start-up businesses as part of the application process. View the complete list of documents to prepare for you application.

Do I need to invest my own money in the business?

Yes. If you are starting or purchasing a business, you will need to make an investment of cash from your own resources in addition to any loans you qualify for. The investment of cash may be from personal savings, equity in real estate or other assets or a gift from a relative. By using your own cash to invest in your business, you are sending the message to lenders and other investors that you believe in your ability to make the business a success and are willing to risk your own equity. The amount to invest will vary based on the situation, but generally a minimum of 10% of the total cost of the project is required to come from the business owner. Plus, having enough of your own investment provides additional cushion when things don’t go as planned – and they rarely do. This provides a cushion for those bumps in the road that are hard to predict.

Do I need to personally guarantee the business loan?

Yes, owners of the business are asked to personally guarantee the loan for the business. It tells the lender that the business owner is serious about their business and about repaying their debts. A business owner should understand that he or she may even be responsible for the loan after the business has been dissolved. When you issue a personal guarantee, you are acting as a cosigner on the loan.

What if I have a poor credit history?

A poor credit history will negatively impact your ability to qualify for a business loan. A Lender will pull your credit history to see if you have paid other lenders in a timely manner. There is a strong correlation between the way people handle their personal debt obligations and the way they handle or will handle their business debt obligations. Sometimes there are extenuating circumstances for delinquent credit and a written explanation describing why the payments were late or not paid should be provided to the Lender.

Do I need to provide collateral for a business loan? If so, what is acceptable?

Collateral is typically required for a business loan from Northern Initiatives. Although cash flow from the business is the primary source of repayment for the loan, Lenders consider collateral to be the secondary source of repayment and extremely important. Your loan officer will work with you to determine what is appropriate for the type of business loan requested. Collateral may include the assets of the business such as equipment, inventory and accounts receivable. Or it may be commercial real estate, residential real estate or titled vehicles.

What interest rate and fees can I expect to pay on a loan from Northern Initiatives?

The interest rate will depend on the type of loan and risk associated with the loan. NI generally will charge a slightly higher interest rate than a bank (and less than financing with a credit card and online lenders) because NI is providing a business loan that a bank was unable to approve. Borrowers are encouraged to apply with their own bank first. If their bank is not able to provide all or a portion of the financing required for the business, NI may be able to help. Fees charged are comparable to other lenders. Your Lender will provide you with an estimate of fees and interest rate based on your loan request.

What does APR mean?

The term annual percentage rate of charge (APR), corresponding sometimes to a nominal APR and sometimes to an effective APR (or EAPR), describes the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc.

Are there any grants available for starting or expanding a business?

Northern Initiatives does not receive funding to provide free money for business capital. Grant opportunities are very limited. Grants.gov provides a list of available federal grants.

How long will it take before I know if I qualify for a business loan?

The process of approving a business loan is something that cannot and should not be rushed. Once you have submitted a complete application package that includes the loan application and the financial and other documents required by your lender, the approval process takes about two weeks. Lenders review the application carefully with your future success in mind. Documentation and disbursement of the loan proceeds will take another two to four weeks depending on the loan terms, collateral and other requirements.

Is a business plan required for my start-up business?

Yes, a business plan and projections are required for start-up business loans. The Michigan Small Business Development Center provides complimentary assistance for developing these documents. Find your local MI-SBDC office.

I have a business idea, what do I do next?

The first step is to connect with an advisor to develop a business plan. Based on your region contact your local SCORE chapter or Michigan Small Business Development Center which provide complimentary assistance for developing these documents. Once you have a plan outlined and are ready to request financing, complete our online application to get started. If you are located in Marquette County, Accelerate U.P. can help turn your idea into reality.

Business Services

Do I have to be a Northern Initiatives’ borrower to access coaching and training?

Business services including access to the portal, coaching and trainings are available exclusively to Northern Initiatives loan customers. If you are a manufacturer, but not a current loan customer learn more about our manufacturing services here.

What Business Services does NI offer?

Each one of our loans comes with access to a suite of practical trainings and tools on topics that matter to every business owner – money, marketing, and management. The process starts with the Business Advancement Review which helps to determine what money, marketing, and management skills you may want to strengthen to help you reach your business goals. Upon completion of the review, you’ll have 24/7 access to a custom training plan which includes videos, presentations, hands-on tools and templates. Upon completion of the training plan you will have access to a coach to create a custom action plan to reach your goals.

Once I get my loan how do I access the Business Services?

You will receive an email within 1 week of your closing inviting you to take the Business Advancement Review, the first step to accessing your custom training plan, expert tools and resources. If you haven’t received your invite, contact info@niupnorth.northerninitiatives.org to get started.