Maryland will receive $23 million for its small business loan guarantee program from a federal jobs bill signed last week, the state and U.S. Treasury will announce Friday.
“Innovative local initiatives that support small business lending are under extraordinary pressure because of state budget difficulties,” Treasury Secretary Timothy Geithner said in a statement. “These funds will provide vital support to successful state-level programs that help local entrepreneurs obtain the credit they need to put more Americans back to work.”
The state and Treasury expect Maryland’s share of the Small Business Jobs Act to leverage $230 million in private lending, with much of it going to small businesses. It will bolster a $10 million, 9-month-old Department of Business and Economic Development program that guarantees up to $250,000 for small business loans.
“In Maryland, we have been able to help a number of small businesses already by backing a portion of their loans, in many cases enabling them to expand and add jobs,” DBED Secretary Christian S. Johansson said.
DBED’s program guarantees up to half of loans worth up to $50,000, and up to $250,000 in larger deals, not to exceed 25 percent of the loan principal.
The small business loan guarantee program — part of the Maryland Industrial Development Financing Authority — has been used in six loans worth $3.45 million this year, and there are another $2.2 million worth awaiting bank approval, according to DBED.
“The small business program, we’ve gotten some good deals done,” said Jim Henry, director of the department’s finance programs. “We’ve not gotten as many as we’d like to see. We’re out constantly, doing outreach about the program to businesses and banks.”
Henry said the federal infusion will make the loan guarantee program, and the small business loans along with it, more attractive to banks because the program’s bolstered bottom line will make it a safer bet in case a business defaults. The program, when it was created, was funded with $5 million from an existing DBED loan program, and another $5 million added in Gov. Martin O’Malley’s budget.
DBED expects to receive the money from the Treasury in the next two to three months, Henry said.
The federal government expects the jobs act to leverage $1.5 billion in private lending through state loan guarantee programs. It also made available $30 billion to community and local banks to increase small business lending.