Small business program on ropes

Some worry that Assembly will hurt struggling firms

March 27, 2003|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

Maryland legislators, struggling with a huge budget deficit, are close to cutting or even eliminating the state's primary loan program for small and minority-owned businesses, a move some warned would hurt the state's most vulnerable businesses.

The House of Delegates has already voted to eliminate the Maryland Competitive Advantage Financing Fund, a $1 million program that provides loans to companies with sales of less than $1 million or fewer than 100 employees.

The Senate has voted to keep the program, which is administered by the Department of Business and Economic Development, but cut its funding from $1 million to $375,000.

"Given the administration's push to help minority enterprises and to help small businesses, this is really a negative signal that is being sent," said DBED Secretary Aris Melissaratos. "I know we have a very difficult financial situation in this state, but this program doesn't cost a lot of money and cutting it will be taking a step back."

Business owners worry that by eliminating the fund the General Assembly would drastically reduce the pool of money available to small and minority businesses, which tend to have difficulty getting financing from traditional banks.

"I think this will only cause harm to minority businesses that are already struggling," said Robert L. Clay Sr., president of the Maryland Minority Business Association, which represents 340 minority-owned businesses.

But Del. Howard P. Rawlings, chairman of the House Appropriations Committee, said cutting the program is necessary to balance the state's budget.

"When the fiscal future for the state is not bright, you have to make some very disciplined and difficult decisions," the Baltimore Democrat said. "The reality is we can't spend money we don't have."

Since it was created in 1999, MCAFF has approved $2.2 million in loans to help 37 businesses.

"It allows individuals who have had challenges in the past but have had made amends with those challenges a way to get financing for their business," said Sen. Verna L. Jones, a Baltimore Democrat. "It provides a way to give them a jump-start."

Reisterstown-based Noospherics Technologies Corp. obtained an $80,000 loan through the program in 2000. At the time, company executives were looking for money to expand and had been turned down by several banks.

The MCAFF enabled the 20-employee computer consulting company to hire four new senior employees and expand its business.

"Banks, until you're a certain size, have very little to offer a small business," said George Kosmides, Noospherics chief executive officer. "This program was instrumental in helping us set up a good foundation of staff so that we could grow."

Ransom's Boutique Inc. in Towson received a $100,000 loan through the fund in 2000. The three-employee company had been turned down for loans by 12 banks before it turned to the state, said owner Byron Ransom.

"They want you to have money to borrow money, and a small business doesn't have that," Ransom said. "They also want you to have been in business for years and years."

Ransom was able to use the money as working capital and to open a second store, although he eventually closed that store.

Rawlings said there are other programs that small and minority businesses can tap, including the Maryland Small Business Development Financing Authority Fund, which is managed by Baltimore-based Meridian Management Group. DBED also has the Maryland Economic Development Assistance Fund, for which small businesses may qualify, Rawlings said.

Jones and Melissaratos said the MCAFF is the only fund dedicated solely to small businesses. These businesses have difficulty competing with large businesses for the other funds, they said.

"We don't have anything else in the state like it, even though individuals say that businesses can get money from other programs," Jones said.

Melissaratos said DBED will continue to push for the program, but will find ways through other programs to help small business if that doesn't work. He would at least like the House to retain the program, even without funding, so it can be funded again when the economy is healthier.

"We have hope in the Senate," he said. "I think this is an important program and I would love to see that it gets kept."

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