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In Michigan, Creating More Resilient Local Economies from the Ground Up

Q&A: CDFIs have a role to play in shifting local economies from being extractive to community-focused.

By Hadassah Patterson

Neighborhoods throughout Michigan have seen their fair share of challenges surviving big industry life cycles, such as coal power and energy corporations. Northern Initiatives started in 1994 as a program of Northern Michigan University’s College of Business to help build economic resiliency in the face of declining resource extraction in Michigan’s Upper Peninsula. Today, Northern Initiatives is based in Marquette and serves all 83 counties in Michigan, with offices across the state.

Resiliency economics is an about-face from extractive economics in more ways than one. Not only does it support completely different kinds of industries, it approaches community sustainability from a ground-up perspective, supporting individuals, small businesses and communities — especially underserved and minority business growth — as an equity-inspired paradigm shift. 

Northern Initiatives President Elissa Sangalli joined the CDFI in a tricky time for small businesses: March 2020. Before that, she had 15 years of experience in building up local economies as the founder of Local First in West Michigan, where she had 1,000 business members involved. She’s continued to support local businesses and grow the number of women- and people of color-owned businesses around the state at Northern Initiatives. 

Sangalli explained more about how Northern Initiatives has helped cultivate a resilient economy in Michigan cities.

What has been your focus in Michigan cities?

We are still committed to supporting rural businesses, but in the last five years increasing the number of people of color-owned businesses we support is one of the top priorities in our strategic plan and we've been working hard in Michigan's urban community to deploy more capital.  

We thought about how to create more sustainability. We also tracked funds to support businesses owned by people more socially or economically disadvantaged. 

We also have a new program for small business energy efficiency — another part of building a more regenerative economy.

When you think about regenerative economy from a CDFI perspective, what does that encompass?

I think about an economy that's providing for the people and community: creating good jobs and taking care of the environment in that place. 

We invest in small businesses that care about their communities, about the people who work for them and are working to create jobs. These businesses become the primary employers in low-moderate income census tracts. We provide coaching services and support to help businesses succeed and generate business for the owners and jobs.

Looking at track records, Northern Initiatives has helped create over 6,000 jobs by supporting over 1,300 loans to small businesses. How has your business coaching model, Initiate, supported that? 

Initiate is an online technical assistance portal created for us to support small businesses, but now it's used across 34 states by 22 other organizations. It is an information resource about money, marketing and management best practices. 

About five years ago we offered organization subscriptions. Before 2020, we had a handful, but with COVID, we saw a rapid rise. So organizations pay to access the platform, but we host meetings helping them provide technical assistance to small businesses around the country.

What are some future goals?

We'll continue to support businesses owned by people of color, and focus on sharing Initiate more. This last year we made the platform fully bilingual with Spanish, and are adding resources to serve this fastest-growing population group in Michigan. 

We're a partner in the Michigan Good Food Fund, which finances healthy food businesses. So continuing to support that is another priority. 

With our Eagle Emerging Entrepreneur Fund, about one-third of the businesses we fund annually are startups.  With the Community Business Loan Fund, we partner with community foundations across Michigan that invest in us in order to invest in small businesses. 

In the big picture of regenerative economics, effective CDFIs navigate systems with multi-level stakeholders to create change. Has that been the case?

Yes. One example of larger businesses supporting our work is in Battle Creek — a loan fund created for us by the Kellogg foundation. They and Kellogg are separate entities. The foundation created a $10 million loan fund for small businesses in Battle Creek to create jobs.

We also have a grant from the foundation for education on starting a business, in hopes some of them launch with help from the foundation funds.

Northern initiatives is uniquely positioned to collaborate with a variety of different organizations many of those organizations use us as a vehicle to create change. We partner with the state, community foundations, and cities across the state. Those partnerships each look different, but everything we do is through those partnerships and funding provided that we can use to live out our mission.

What role does advocacy and regulatory or legislative policy play for Northern Initiatives?

That's something we constantly work with to create more access and add federal and state programs to support diverse communities. 

For instance, guarantee programs the state or the federal government offers that we use to support small businesses are especially helpful because they help us lend when there isn't collateral. 

This is a pattern among impactful CDFIs. We see reframing of risk and innovative access, especially since the pandemic. 

How do entity guarantees work? Is this a percentage of loan volume or specific initiatives?

There are a few programs. For example, the state of Michigan has been one terrific partner. CDFIs are intermediary lenders, so we borrow from different sources and repay that. Guarantee programs make riskier investments but maintain our commitment to funders, so we can borrow more money to lend to small businesses and keep that cycle going.

This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is developed in partnership with Next City.