The State of Maryland has a variety of flexible financing programs designed for new & expanding businesses looking for alternatives or compliments to traditional bank loans.
In addition to the Neighborhood BusinessWorks and C-PACE program (highlighted by these recent local case studies), the State offers: the Video Lottery Terminal Fund and Maryland Small Business Development Financing Authority programs.
Video Lottery Terminal Fund
Named for its funding source, the Video Lottery Terminal (VLT) Fund repurposes taxes collected at Maryland casinos to create new opportunities for local small businesses to access capital.
Funds from this program can be used to provide senior loans, subordinated loans, micro loans, loans with success features, acquisition of equipment, owner-occupied real estate, business acquisitions, leasehold improvements, professional/technical assistance, and refinancing of existing debt. VLT loans typically are a minimum of $25 to $50,000, and can go up to a maximum of $500,000.
As the program was designed to assist those struggling to obtain funding from banks, there are some reduced barriers to entry: full, limited and no collateral value coverage will be considered; and business and individuals that have less than fair credit scores will also be considered in special circumstances. Personal guaranties of debt are required.
More information on this loan program can be found through the Maryland Department of Commerce.
Maryland Small Business Development Financing Authority Programs
MSBDFA is a more robust program created in the 1970s to promote the viability and expansion of businesses owned by economically and socially disadvantaged entrepreneurs. The organization’s financing activity is distributed through a continuum of program components:
Contract Financing Program (CFP)
Designed for companies engaged in government contracting, CFP provides financial assistance to eligible businesses in the form of direct loans and loan guarantees. The funds may be used for working capital and the acquisition of equipment needed to begin, continue, or complete work on contracts where a majority of funds are provided by a federal, state or local government agency or utilities regulated by the Public Service commission.
Guaranty Fund Program (GFP)
GFP provides loan guaranties and interest rate subsides for loans made by financial institutions to eligible businesses. GFP can also subsidize up to 4 percentage points of the interest being charged by the financial institution making the loan.
Surety Bond Program (SBP)
SBP assists eligible small businesses in obtaining bid, performance or payment bonds necessary to perform on contracts where the majority of funds are provided by a government agency, public utility company or private entity. SBP directly issues bid, performance or payment bonds or guarantees a surety’s losses incurred as a result of the contractor’s breach of a bid, performance or payment bond.
Equity Participation Investment Program (EPIP)
EPIP is designed to help meet the needs of small businesses that do not meet the credit criteria of financial institutions and are unable to obtain adequate business financing on reasonable terms through normal financing channels. The proceeds, limited to $2million, are used for the specific purpose of purchasing a franchise, acquiring an existing profitable business, developing a technology-based business, and to start or expand other types of small businesses.
InvestMaryland
InvestMaryland is intended to expand ownership in the areas of information technologies, cyber-security, broadband and wireless communications; and in green technology, broadcasting and media services that improve business processes. The proceeds may be used for working capital, to purchase machinery and equipment, to enhance existing technology and for acquiring an existing technology business. Investment size can range from $100K to $2.5 million, Additional investors are generally required for InvestMaryland to participate in financing the project.
More information on the MSBDFA programs can be found on the Maryland Department of Commerce’s website.
Looking to finance a new business venture in The City of Frederick? Contact the City’s Department of Economic Development for additional start-up and expansion assistance.