Although Pailen-Johnson Associates Inc. is one of only three firms in the U.S. that has the right to sell a high-tech computer security system to the federal government, the company couldn't get a loan.
Then the president and owner, William Pailen, got a suggestion from a Morgan State University professor. He told Pailen to ask Maryland for a loan.
This week, Pailen got the $250,000 he needed. He borrowed the money through the contract financing program of the Maryland Small Business Development Financing Authority (MSBDFA).
"Without the state's help it would have been very difficult to get financing," Pailen said.
In fact, Pailen specifically moved his 30-employee business from Vienna, Va., to offices in Baltimore and Rockville to take advantage of the state's financing program.
Yesterday, MSBDFA was attempting to open the doors to financing for other minority-owned businesses. More than 300 business men and women attended the second annual "Strategies for Success" conference. The conference, held at the Stouffer Harborplace Hotel, was designed to provide business executives with information about how to grow their firms.
"It is in the interest of the government to help grow businesses," Pailen said.
Pailen said he expects his business, with average sales of $1.5 million a year, to hire a total of 50 people for the Baltimore office in the next three years. He also projects that sales will increase to $3 million by next year. Until now, he said sales have been flat, generally because of the lack of access to working capital.
The 11-year-old minority-owned firm has temporarily set up its office at the Raleigh Industrial Center in Baltimore. Pailen-Johnson will also be the first tenant at the new South Harbor Business Incubator on Key Highway, scheduled to open in January. The South Harbor incubator will provide support for companies that focus on computers and engineering.
The 55-year-old Pailen said MSBDFA was his saving grace. He said he wasn't sure how he was going to find the money to buy the parts he needed to service a $300,000 contract he has already won from the Defense Logistics Agency.
Pailen was one of three firms from a pool of 225 that was selected by the Department of Defense to develop a computer system capable of keeping out hackers and others that may try to tap into the federal government's computer systems. The system is endorsed by the National Security Agency.
Pailen, a electronic engineer, developed the system along with a team of his engineers.
"I won this right fair and square. There wasn't any kind of small business set-aside or minority business set-aside," he said.
Pailen said his troubles of finding capital was typical of a small business but may have also been hampered by the fact that he was black.
"There was a time people were looking for high-tech businesses to invest in but I came along when that was waning," he said. "I also was developing a line of computers that some people were concerned couldn't be done by a small business and certainly might be too complex for a minority business."
Pailen said MSBDFA has temporarily offered him the chance to spend more time on developing his product. However, eventually he will have to go back to the traditional lending sources which can provide a larger amount of loans.