The Maryland Small Business Development Financing Authority (MSBDFA) program was created by the Maryland General Assembly in 1978. The original purpose of the program was to promote the viability and expansion of businesses owned by economically and socially disadvantaged entrepreneurs. In the 2001, The program’s client base was broadened to include all small businesses rather than only those that are owned by economically and socially disadvantaged entrepreneurs. The statute has been expanded to include small businesses that do not meet the established credit criteria of financial institutions, and consequently are unable to obtain adequate business financing on reasonable terms through normal financing channels. The Department has engaged MMG Capital Group (MMG) to manage the program on the Department’s behalf.
MSBDFA’s financing activity continues to be supported through the repayment of loans, generation of interest income and the collection of fees. To find out more on each of the program components of MSBDFA, click the links below for a brief summary:
MSBDFA/SSBCI Funding: In 2022, the State of Maryland was approved by the U.S. Treasury to administer up to $198 million in federal assistance through Treasury’s State Small Business Credit Initiative (SSBCI). The funding is distributed through various state business lending programs, including MSBDFA’s Equity Participating Investment Program (EPIP), which will receive $45 million over the next 7 years. See all the Maryland SSBCI programs here.
Through EPIP, the SSBCI funds will be used to support small and Socially and Economically Disadvantaged Individual (SEDI) owned businesses in the expansion of business ownership and small businesses that do not meet the established credit criteria of financial institutions and/or investors. SSBCI funded assistance may be provided in the form of subordinated term loans, lines of credit, demand loans, letters of credit and equity investments.
The funds can be used for working capital, acquisition of equipment, supplies, owner-occupied real estate, business acquisitions, leasehold improvements, professional/technical assistance, and refinancing of existing debt (under qualifying circumstances). The interest rate can be as low 2%.
To obtain SSBCI funding, the borrower must have private funding (banks, insurance companies, investors, owners, etc.) that is equal to or greater than the SSBCI funding.
Contract Financing Program (CFP) provides financial assistance to eligible businesses in the form of direct loans. The funds may be used for working capital and the acquisition of equipment needed to begin, continue, or complete work on contracts where a majority of funds are provided by a federal, state or local government agency or utilities regulated by the Public Service Commission. Financing is limited to $2,000,000 and must be repaid during the term of the contract. Interest rates range from the prevailing prime to prime plus 2 percent. Applicants may qualify for financing prior to contract award.
Guaranty Fund Program (GFP) provides financial assistance to eligible businesses in the form of loan guaranties and interest rate subsidies for loans made by financial institutions. A loan guaranty cannot exceed the lesser of 80 percent of the loan or $2,000,000. Guaranties cannot exceed 10 years with an interest rate charged by the financial institution limited to prime plus two percent. GFP can also subsidize up to four percentage points of the interest being charged by the financial institution making the loan. The subsidy is subject to an annual review. Terms of repayment of the subsidy are negotiated directly with the borrower. Loan proceeds can be used for working capital, the acquisition and installation of machinery or equipment, refinancing of existing debt and the purchase of, and improvements to, real property owned or leased by the applicant.
Surety Bond Program (SBP) assists eligible small businesses in obtaining bid, performance or payment bonds necessary to perform on contracts where the majority of funds are provided by a government agency, public utility company or private entity. SBP directly issues bid, performance or payment bonds or guarantees a surety’s losses incurred as a result of the contractor’s breach of a bid, performance or payment bond. Bonds that are directly issued are limited to $2,500,000. Guaranties are limited to 90% of the face value of the bond not to exceed a maximum participation of $2,500,000. Guaranties on bonds remain in effect for the duration of the surety’s exposure under the bond. Bonds issued directly will remain in effect for the duration of the qualified contract and any related warranty period. Bond premiums generally range from 2% to 3%. Also, a surety bond revolving line of credit may be established to directly issue or guaranty multiple bonds to a client within pre-approved terms, conditions and limitations.
Equity Participation Investment Program’s (EPIP) purpose is to expand business ownership by socially and economically disadvantaged entrepreneurs and small businesses that do not meet the established credit criteria of financial institutions and are unable to obtain adequate business financing on reasonable terms through normal financing channels. Financial assistance is provided through the use of loans, loan guaranties, and equity investments. The proceeds are used for the specific purpose of purchasing a franchise, acquiring an existing profitable business, developing a technology-based business and to start or expand other types of small businesses. Equity investments may take the form of the purchase of qualified securities, convertible debt, interest in a limited partnership or a limited liability company, simple agreements for future equity (SAFE) other debt and equity investments. All loans and equity investments must be recaptured by the end of the seventh year.
Taber J. Small is a Vice President and Loan Officer for MMG Capital Group. Prior to joining MMG, Mr. Small was an experienced commercial lender with previous employment at Bank of America, Wells Fargo, PNC, JP Morgan Chase and recently WesBanco Bank as a Senior Vice President Commercial Banker in middle market banking. During his tenure as a banker, he received numerous star banker awards and received the Omega Commercial Lending Advanced Credit Training Certificate of Achievement. He is a graduate of the University of Connecticut with a B.A. in Economics.
Mr. Taber is also very involved in the community and serves on numerous boards of organizations such as Associated Black Charities, Baltimore City Chamber of Commerce, 29th Street Community Center and NPOWER. He also serves on the development committee of the Reginald F. Lewis Museum and is a member of the Platinum Center Club based in Baltimore.
Contract Financing Program (CFP) provides financial assistance to eligible businesses in the form of direct loans. The funds may be used for working capital and the acquisition of equipment needed to begin, continue, or complete work on contracts where a majority of funds are provided by a federal, state or local government agency or utilities regulated by the Public Service Commission. Financing is limited to $2,000,000 and must be repaid during the term of the contract(s). Applicants may qualify for financing prior to contract award. Financings in the form of revolving lines of credit are renewable on an annual basis.
General Eligibility:
Maximum Policy Limits: Loans Provided Directly by MSBDFA $2,000,000
Interest Rates: Generally Prime Rate + 2% Payments: Principal and interest are payable as contract proceeds are received, in amounts satisfactory to MMG and the Authority. All Payments must be assigned to MSBDFA
Term: Duration of the Contract(s)
Use of Proceeds: Working Capital, Purchase of Machinery and Equipment, Supplies and Materials (Required to perform the contracts)