Maryland has been awarded $23 million in federal funding to help small businesses and startup companies gain access to capital, state and federal officials announced Wednesday.
The state plans to use the money to make direct loans to small businesses, help guarantee private lending and invest in startups through existing programs. The money is expected to produce $230 million in new private-sector lending for small businesses in Maryland, U.S. Treasurer Rosie Rios said.
"For us, this is a shot in the arm to have resources necessary to assist small businesses," said Christian S. Johansson, Maryland's secretary of business and economic development. The federal funds are expected to help more than 100 businesses. as well as to create and retain 9,481 jobs, Johansson said. More than half of those jobs would be new, Johansson said.
The financial crisis placed significant hurdles on borrowing, especially for small businesses. While lending standards are easing somewhat for larger companies, small-business owners continue to have a hard time finding capital in a still-troubled economy.
Even growing businesses often do not qualify for bank loans because of declines in values of homes and other real estate, which act as collateral, Johansson said.
"When you look at what has happened since this recession began, clearly there's been a dramatic change in credit markets," he said, adding that the credit crunch hit Main Street harder than Wall Street.
"No recovery has happened without small businesses," Johansson said.
Gov. Martin O'Malley, who made investments in small businesses and startup companies a centerpiece of his economic agenda in this year's General Assembly, said in a statement Wednesday that the federal funds are "coming at time when Maryland small businesses, and small businesses around our country, are continuing to navigate the credit challenges brought by the economic downturn."
O'Malley recently signed legislation to create the Invest Maryland fund, a $75 million tax credit program to support new businesses. The money generated through Invest Maryland will be available through the state's existing Maryland Venture Fund and selected private venture firms.
A portion of the new federal funding — $6.5 million — will go to the Maryland Venture Fund, which has been making investments in new businesses for more than 15 years.
An additional $10.5 million will benefit the Maryland Industrial Development Financing Authority and $4.5 million will go to the Maryland Small Business Financing Authority. Both are state-managed loan guarantee programs.
The remaining $1.5 million will go to the Maryland Department of Housing and Community Development's Neighborhood BusinessWorks program, which provides direct loans to new or existing small businesses and nonprofit groups.
Maryland was one of five states that received funds from the State Small Business Credit Initiative, which was designed to support private-sector lending under the Small Business Act supported by leaders of the Maryland congressional delegation.
So far, $80 million has been disbursed to California, North Carolina, Missouri, Vermont and Maryland.