New partnership to offer small-business loans Credit available at 8% interest

June 24, 1993|By Lorraine Mirabella | Lorraine Mirabella,Staff Writer

Small Anne Arundel County businesses that have been considered poor risks by banks may have a new chance to get low-interest loans thanks to a partnership forged yesterday between the county's newly privatized economic arm and area banks.

The Anne Arundel Economic Development Corp., a private corporation that replaces the county Office of Economic Development July 1, will run the program, offering loans of up to $150,000.

County officials and business people touted the creation of the small-business loan fund as a step toward making the county more competitive in attracting and keeping business.

Sixteen banks that do business in the county have agreed to extend lines of credit, ranging from $50,000 to $150,000 per institution, expanding what is now called the Incentive Fund to more than $2.5 million.

The economic development corporation will borrow the money from the banks at 6 percent interest and lend it to small county businesses at 8 percent, using the markup to cover operating costs.

The county agreed to let the corporation manage its $1.2 million small-business loan portfolio, which has made 22 loans since 1987.

Michael Lofton, the county's economic development director, who will become executive vice president of the corporation, expects many businesses that receive loans through the corporation to be those that have failed to get traditional bank loans because of their small size or lack of a track record.

The corporation won't face the same scrutiny from federal regulators that banks do. A committee of business people will review loan applications.

In addition to administering the loans, Mr. Lofton and a staff of five are to continue the job of the economic development office by recruiting new companies, focusing on the Washington area, working to keep existing ones in the county, offering counseling services to small and new businesses, and advising government officials on economic policy.

"It'll be a lot easier for this organization to do things without having to go through layers of bureaucracy and red tape, as was necessary in the past," said Jeanette Wessel, executive director of the Anne Arundel Trade Council.

The corporation will rent its current space at the Heritage Center on Riva Road from the county, financed by an annual $270,000 from an increase in the county's hotel tax and a $300,000 county grant.

"It will be just like running a business, with projections, a marketing plan, income and expenses," said Jim Russell, chairman of the board and treasurer of Severn Graphics.

"The county will have the input from business leaders who know the day-to-day problems of running a business."

County Executive Robert R. Neall has made privatization a centerpiece of his plan to reduce the size of government.

He began in January with a pilot program, severing the county Office of Manpower. The office became the Business and Workforce Development Center, a $3.5 million nonprofit corporation that helps the unemployed find jobs.

"The most important thing we can do is be responsive to the existing employers," said Mr. Lofton. "They meet payroll that makes the economy work and are the best prospects for new job creation."

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