Laketa Henderson
DETROIT,—From tip of the Upper Peninsula to southeast Michigan, community banks are embedded into the fiber of tight-knit communities across the state of Michigan. And when a small business owner or a budding entrepreneur is looking for help, this is often the first place they stop.
When community banks offer loans guaranteed by the U.S. Small Business Administration (SBA), the loans often offer more favorable terms to those who might not other qualify for a traditional loan. When a community bank helps facilitate access to capital in their community, they are supporting local economic growth, business expansion, and job creation -- reinforcing the bank’s role as a key local partner. It’s a win-win for the community, the bank and the small businesses.
In the 2025 fiscal year, Michigan community banks closed 320 7(a) loans, unlocking $215 million in capital for the state’s small businesses.
“Access to capital is critical for businesses. The U.S. Small Business Administration is proud to partner with community banks across the state of Michigan to do support small businesses,” said SBA Michigan District Director Laketa Henderson. “These community banks are reaching entrepreneurs in all pockets of Michigan, ensuring that business capital can spark growth and job creation in every corner of the state.”
These community banks are trusted institutions among their neighbors.
When the buyers of a 100-year-old screw manufacturer in St. Clair, Mich., were looking for financing they looked a multiple lenders. Ultimately, the new buyers picked ChoiceOne Bank, a community bank headquartered in Sparta, Mich., because of their superior customer service. The community bank model enabled the banker to give an in-depth review of financial projections, intellectual property, and the complicated financial picture of the owners. In the year since the loan closing, the business has grown sales and hired more employees.
SBA-backed loans can offer access to better terms, lower down payments, extended repayment periods, and more flexible terms. For small businesses, an SBA loan can help them build their credit history to help them secure additional funding in the future.
Two key loan programs that community banks utilize are:
7(a) loans can be used for general business purposes like working capital, equipment purchases, and real estate acquisition.
504 loans are designed for long-term, fixed-rate financing for major fixed assets such as land, buildings, and machinery.
Earlier this year, the SBA’s Michigan District Office recognized Horizon Bank as the “Community Lender of the Year” for FY24, with First Internet Bank of Indiana and Oxford Bank named as finalists.
“Community banks are among Michigan’s most important small business champions,” Henderson said. “These institutions enable SBA to get more capital into the hands of entrepreneurs who would otherwise not be able to access loans at reasonable rates. Together, we empower entrepreneurs to pursue their passion.”
SBA-backed loans not only help these small businesses but also help community banks by reducing risk to exposure if the borrower defaults. In addition, the guaranteed portion of SBA loans can be sold in the secondary market, providing liquidity to community banks and allowing them to free up capital for new lending.
SBA defines a community bank as a depository institution that is locally owned and operated with branch locations in Michigan. Generally, community banks are characterized as having less than $10 billion in total assets.