Md. Senate passes bills offering help for disadvantaged businesses

February 09, 1991|By David Conn | David Conn,Annapolis Bureau of The Sun

ANNAPOLIS -- Economically and socially disadvantaged business people looking for cash and loan guarantees stand to gain from three Senate bills passed unanimously yesterday.

The bills affecting programs within the state Department of Economic and Employment Development would increase and liberalize the lending and investment policies of the Maryland Small Business Development Financing Authority.

The House Economic Matters Committee has three similar bills before it.

No hearings have been scheduled for that legislation.

Timothy Smoot, deputy director of the financing authority, said his agency helps business people who are handicapped, members of minority groups or from economically stricken areas of the state.

The programs affected by the Senate bills would:

* Provide short-term loans, typically for one year, for working capital before businesses begin getting paid under contracts with government agencies or public utilities (the Contract Financing Fund Financial Assistance Program).

Senate Bill 34 would double, to $500,000, the size of loans under the

program.

"It's been six years since we've had the loan amount increased," Mr. Smoot said.

"The cost of doing business has just increased dramatically since 1984."

Since 1980 when it was started, the program has lent $10.9 million.

* Guarantee, up to 80 percent, the value of loans to disadvantaged business people (the Long Term Guaranty Program).

Senate Bill 35 would increase the amount of money the state could guarantee under the program, to $600,000 from $500,000; raise the rate a lender could charge from the current prime rate plus 2 percentage points to prime plus 2 points and allow the state to guarantee loans for less than a year.

"It allows the small disadvantaged contractors the opportunity to compete with the larger contractors," Mr. Smoot said.

The program has guaranteed $12.7 million worth of loans since its inception in 1982.

* Provide loans or equity investment to start franchises or to acquire profitable businesses (the Equity Participation Investment Program).

Senate Bill 37 would increase from five to seven years the amount of time a new franchisee would have to repay the state's loan or investment.

The bill also would decrease from three to one the number of appraisers the company would have to hire to value the business when it eventually is sold.

"We're finding that a number of these businesses . . . do have a difficult time in the first couple of years," said Randy Coxton, director of the equity program.

"It's becoming a cash-flow difficulty."

The program has lent or invested $2.3 million since its inception in March 1987, Mr. Smoot said.

The business-acquisition side of the program, nearing the end of its first full year of operation, has made available $70,000.

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