MSBDFA FREQUENTLY ASKED QUESTIONS
1. Where does my business need to be located to qualify for financing?
The company’s principal place of business must be in the State of Maryland to qualify.
2. How do you define a small business?
Small business is defined by the Small Business Administration size standards SBA.gov. You will need your business NAICS Code to determine if your business qualifies as a small business.
3. How does the fund decide what the interest rate will be?
Financings that qualify for SSBCI funding will receive more favorable rates than those financings that do not qualify. The interest rate will be based on the perceived risks of the transaction. The greater the risk of the loan; the higher the interest rate. Refer to Debt Interest Rates to see the range of the interest rates.
4. Is there an application fee?
If you are applying for debt, equity or surety bonding, there is a $250 application fee required at submission of the application (not applicable for loan guaranty requests). You can make payments online in the Application Portal or if you pay by check, you should make it payable to MSBDFA and mail to:
Meridian Management Group, Inc.
826 East Baltimore Street
Baltimore, MD 21202
Your application will not be processed until the application fee is received. Include the name of the business and print application fee in the memo section of the check.
5. Does the fund charge any fees in connection with getting a loan or investment?
If your financing is approved, a Commitment Fee of $500 will be required at the time the Commitment Letter is accepted. The Commitment Fee is non-refundable but will be applied to the closing costs. The closing costs will consist of credit, lien, judgement reports, lien filing fees and other incidental costs. Loan document preparation and MSBDFA’s legal counsel fees will be the responsibility of MSBDFA. If the financing does not close, these costs will be the responsibility of the applicant.
6. If I have not found private funding as a match for SSBCI funding, can I still apply?
Yes, MSBDFA will collaborate with you and its partnering banks to try to identify the private funding needed to qualify for SSBCI funding. If matching private funding is not available, MSBDFA will still consider providing financing using non-SSBCI funding which does not require a match.
7. If I have been turned down by a bank, does that mean I will not qualify for SSBCI funding?
No, MSBDFA will collaborate with you and its partnering banks to try to identify the private funding needed to qualify for SSBCI funding. If matching private funding is not available, MSBDFA will still consider providing financing using non-SSBCI funding which does not require a match.
8. How will I know if my business qualifies for SSBCI financing?
Your assigned Loan Officer will advise you when that determination is made.
9. If I do not have collateral to pledge for a loan does that mean I will be turned down?
The lack of collateral alone will not disqualify you from applying for a MSBDFA loan, but it will be a factor, among others, in determining the approval, loan amount, interest rate and maturity.
10. Do you require a business plan?
A business plan is required for all MSBDFA applicants.
11. What should be in a business plan?
A business plan should be concise. However, it should contain a detailed description of the product and/or service provided; an discussion of key events in applicant’s history; trends in applicant’s industry and market; a marketing plan; a description of the management team’s experience and responsibilities; key risks to applicant’s business, including labor, legal, regulatory, and competition.
12. Do you require life insurance on owners/guarantors?
Life insurance may be required on principals (if insurable) and in some cases key employees (if insurable).
13. What is the minimum amount required as an equity injection in a new business?
There is not a minimum requirement, but generally, an equity investment of 10% or greater of the total start up
cost is expected in a new business from the owners.
14. What is the minimum down payment required for an asset purchase (building, vehicles, and equipment)?
There is not a minimum requirement but generally, a down payment of 10% or greater is expected for an asset purchase.
15. Under what conditions is refinancing of existing debt allowed?
For SSBCI financing, the borrower must receive a loan of at least 150% greater than the loan principal being refinanced, and the annual percentage rate (APR) must decrease by 30%. For traditional MSBDFA program funding, the borrower must show improved cash flow. MSBDFA funding cannot be used to refinance debt that is in default or at risk of a loss.
16. How long does the process take?
MSBDFA attempts to provide the funding and structure that it determines meets the needs of the business to be successful. There is not a “cookie cutter” period to reach that determination. There are many factors. Some of which include the response time of the applicant. Once all information has been received and it has been determined to present a request for approval, the approving body normally meets the 2nd and 4th Thursday of each month. If approved, closing of the loan is dependent on the applicant’s ability to provide the necessary closing documents in a timely manner. Generally, this can occur between 3 to 6 weeks following acceptance of the Commitment Letter.