Economic development loans help businesses expand

October 27, 1994|By Shirley Leung | Shirley Leung,Sun Staff Writer

All he needed was a $135,000 loan, Paul Barielle figured, and hTC he could turn his marine electronics and boat service company of four employees into one of the largest of its kind outside of South Florida.

But a year ago, neither the banks nor the Small Business Administration was willing to take the risk. Mr. Barielle, 35, turned to the Anne Arundel Economic Development Corporation and its small-business loan program for the money.

"It's been wonderful, yet not intimidating, which often a bank can be," he said.

With the help of the loan, the Better Boat Co. has tripled its size to become a $2 million enterprise with a staff of 13.

Mr. Barielle's loan was one of 11 the development corporation made in the year since it took over the county's small-business loan portfolio, a record for one year since the county government started the program in 1986. The county issued only 23 loans in the seven years it ran the program.

Corporation officials attribute the increase to aggressive promotion among local banks of what some have dubbed "the last resort fund" because it's usually the last one businesses turn to for help.

"We're filling a void in the business community by providing capital to budding entrepreneurs," said Shelly M. Gross-Wade, who manages the fund.

Small businesses, in particular young ones, have difficulty securing loans that are based on financial viability and experience. More than 80 percent of the loans issued by the development have gone to companies that are less than 3 years old.

Fifteen banks have made $2.5 million available for corporation's Incentive Fund, making it the state's third largest portfolio for small-business loans, behind Prince George's and Frederick counties, Ms. Gross-Wade said.

The economic development corporation borrows the money at 6 percent interest and lends it to small business at a 9 percent rate, using the markup to cover administrative costs.

"Programs like the county's are perfect for us because we're a small bank," said Richard Morgan, president and chief executive officer of Annapolis National Bank. "It's a win for the county who can protect a niche business. It helps the bank because it helps us do a loan we normally couldn't do."

Since the program began, 34 companies have received $2.4 million, and more than 760 jobs have been created or retained as a result. Of those accounts, 14 have paid back loans and two have defaulted.

"It helped us to buy a new facility as opposed to renting one out," said Marc Resnick, vice president of Techmart, an Odenton computer supplies and consumer electronics company that borrowed $50,000 in 1988. "There's no question that without the help of the county we wouldn't have been able to that."

Since then, Techmart has paid back the loan, its sales have quadrupled to $12 million a year and its staff tripled to 18 employees.

Because the primary goal of the Incentive Fund is to promote business in Anne Arundel, it is open to any company that expands, stays in or moves to the county.

The Better Boat Company is a case in point.

"We were determined to [expand] with local people and local customers," Mr. Barielle said.

"If the Incentive Fund hadn't been there, we wouldn't have been able do it."

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