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Need financing? Don’t forget to check out government programs

Deciding to start or expand a small business is a risky proposition that comes with a lot of costs. And unless you recently hit the lottery, you are probably not going to be able to cover all of the costs with the cash that you have readily available to you.

Don’t fret, you are not alone.

Virtually all small (and even large) business owners have had to raise capital by taking out loans, or selling ownership to investors. Many times this is done by visiting your local bank and selling them on your (and your business’s) credit worthiness. Other times, this is done by reaching out to friends and family to see if they want to join you on your business’s journey. Often overlooked, however, is a viable third source for financing: the government.

All three levels of government offer some sort of program aimed at helping develop and grow small businesses. These programs range from large  — the federal governments SBA504 program, which provides existing viable small businesses with long-term, below-market rate financing for the acquisition of land, building, machinery and equipment, construction and renovation, resulting in the creation of new full-time jobs; to more modest local programs like the Harford County Economic Development Opportunity Fund program, which is designed to stimulate increased financing for new professional/executive, manufacturing, research and development operations and equipment purchases by complementing traditional lenders, and larger state or federal funding programs.

Sometimes assistance from these programs comes in the form of low-interest loans, other times they are written as loans that are forgiven if the borrower meets certain goals that benefit the jurisdiction (i.e. job creation).

So why has government involved itself in business financing? The answer is simple: governments benefit when businesses do well.

There are only two ways for government to grow its revenue: increasing tax rates or expanding the tax base. In a state where 96 percent of residents think they are taxed enough or too much, expanding the tax base by helping business grow and create jobs is much more palatable.

Besides that, from a business perspective alone — the numbers look good. While I will omit the name of the business involved, I’ll give an example of how this type of program has proven to be a good investment for my home county.

In this case, Harford County offered a $100,000 grant as part of a much larger package offered by the state and private financiers to lure a business. When the business decided to locate here, Harford picked up an additional $60,000 in personal property tax plus realized the creation of 1,500 new jobs. Any businessman would tell you that is a great return on investment.

Outside of financial assistance, many local governments also offer business incubator services including competitively priced office space. So when you start thinking about growing your small business or starting a new business, add your local economic development office to the list of places you need to call.