Merchant Funding

The U.S. House on Thursday approved a small-business loan measure supported by Gov. Martin O’Malley (D) and state business Secretary Christian S. Johansson, who testified in its support last month.

The legislation would provide additional funding to allow states to guarantee loans for small businesses that qualify. The national proposal is similar to a Maryland program that guarantees loans through community banks. A companion bill is pending in the Senate.

Mary Bass, vice president of Bass Machining, said a state-guaranteed loan allowed her Baltimore machinery manufacturing company to obtain a larger loan to buy needed equipment and open a line of credit to help complete a project than if the company had obtained a loan without the guarantee.

While the company’s regular lender, Bank of America, had approved a loan, it was for less and would have required more personal assets to be put up for collateral than with the state-guaranteed loan the company received through The Harbor Bank of Maryland in Baltimore, Bass said.

The loan was easier to obtain than other loans she had heard about involving the U.S. Small Business Administration.

“I’ve heard horror stories of those,” Bass said.

The company, which has made parts for customers ranging from the container industry to NASA, has 13 full- and three part-time workers, she said.

“If you need something made, we have a machine that will make it,” Bass said.

The House bill would provide $20 billion for states to expand their capital access programs in addition to an additional $30 billion small-business loan program.

Last month, Johansson, of the Maryland Department of Business and Economic Development, testified that small businesses employ about half of all workers, but find it difficult to get the loans they needed to expand.

“In the aftermath of Wall Street excesses, banks have been forced to adopt significantly stricter banking practices, which have reduced the flow of credit to their Main Street clients,” Johansson said.

“Expanding the capacity of existing State and U.S. territory small business loan guarantee programs offers a shovel ready solution to restore the flow of credit to our small businesses that have been crippled by tougher lending standards and devalued collateral,” O’Malley said in a statement.

O’Malley gained the support of 27 other governors at the National Governors Association meeting in February.

In Maryland, the Small Business Credit Recovery Program was launched in 2009.

“Once we got hooked up with Harbor Bank, it was much easier,” Bass said.

So far, two businesses have received loans through the state program, while final approval is pending on eight others, for a total of $5 million in loans through community banks such as Harbor Bank, which has provided the two loans.

“The state guarantee provides an additional source of support that has incented The Harbor Bank to increase lending to small businesses during these challenging economic times,” said Darius L. Davis, executive vice president and COO of Harbor Bank in a statement.

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