TechTown sets up microloan fund for start-ups

Thursday, April 1, 2010 | Source: metromode

Microloan funds are becoming the economic tool of the year for more and more regional business accelerator agencies. The latest is the First Step Fund in Detroit's TechTown business incubator.

Invest Detroit and Ann Arbor SPARK, which runs the Michigan Microloan Fund, are behind the First Step Fund. The idea is to create a funding source for local start-ups starving for seed capital in the midst of the credit crisis, whereas traditional lending institutions have at best been stingy with investment capital.

"If we're serious about dealing with the unemployment rate in the city of Detroit, which is now at 30 percent, we need to develop numerous sources of financing and we need to do it quickly," says Randal Charlton, executive director of TechTown. "This is not a normal situation where we can respond normally."

He adds that TechTown currently has 1,300 entrepreneurs coming through its FastTrac program. About half of them have already graduated and are working toward establishing their entrepreneurial ventures. This fund would make loans to entrepreneurs and start-ups like this that range between $10,000 and $50,000.

The fund hopes to make 40 loans this year, possibly by mid-April. That's when a board independent of TechTown will decide which loans to make first.

"What we hope to do is deploy as much as possible, consistent with reasonable background checks to make sure our candidates are reasonably prepared," Charlton says.

The First Step Fund is part of the New Economy Initiative's effort to turn TechTown into one of the primary economic hubs of Michigan. The Kaufman Foundation and other institutions are investing millions of dollars to create thousands of new businesses in Detroit over the next couple of years.

Source: Randal Charlton, executive director of TechTown
Writer: Jon Zemke