Small Business Loans
Learn All About Small Business Loans in Maryland
Maryland is home to more than 696,700 small businesses, which account for 99.6% of all enterprises in the state. From the biotechnology firms along the I-270 corridor to the maritime industries of the Chesapeake Bay, these companies employ close to half of the state’s workforce.
Whether you’re launching a cybersecurity startup in Columbia or expanding a crab processing facility on the Eastern Shore, finding small business loans in Maryland can be a key step in developing your business. Here’s what you need to know about securing financing for your company.
- Key Points
- • The Maryland Small Business Development Financing Authority (MSBDFA) offers contract financing and surety bonds specifically for socially and economically disadvantaged entrepreneurs.
- • The Maryland Technology Development Corporation (TEDCO) provides both seed funding and grants for technology startups.
- • Video Lottery Terminal (VLT) funds use proceeds from the state’s casinos to provide funding for small businesses.
- • The Maryland Agricultural and Resource-Based Industry Development Corporation (MARBIDCO) offers loans and grants to new and existing businesses.
- • Equipment financing can help Maryland companies access loans with more advantageous terms since the equipment itself can serve as collateral.
Popular Types of Small Business Loans in Maryland
Entrepreneurs in the Old Line State can benefit from a sophisticated financial ecosystem that blends state-sponsored equity programs with traditional lending. The following sections outline the most common funding options available to business owners across Maryland.
Maryland Small Business Loan Programs
The state actively fosters economic growth through the state’s Department of Commerce and specialized managers like the Meridian Management Group. The Maryland Small Business Development Financing Authority (MSBDFA) is a cornerstone program, offering direct loans and loan guarantees to businesses that may not meet standard bank credit criteria. Additionally, you can apply for a small business loan from the state’s Video Lottery Terminal (VLT) Fund through one of the fund managers.
Term Loans
With a term loan, a lender provides a small business with an upfront lump sum of capital. Over a specified period (the term), the borrower then makes regular payments to repay the principal and interest, which is usually charged at a fixed rate. This structure can make a term loan an appealing option for financing large, one-time investments with predictable costs. For example, a logistics company near Baltimore might use a term loan to upgrade its warehouse infrastructure.
Business Lines of Credit
In contrast to a term loan, a business line of credit can let you access a pool of funds that you can draw from when you need funding, up to a preset limit. Typically, you’ll pay interest only on the money you actually withdraw, and as you repay the balance, you’ll replenish the pool of funds so the money becomes available for you to withdraw again.
Lines of credit can be helpful for businesses subject to revenue lulls or uneven cash flow. For example, a seasonal tourism business in Ocean City might use a line of credit to manage payroll and inventory during the quieter winter months.
Equipment Financing
If your business is in need of a specific physical asset, like machinery, vehicles, or technology, you might consider applying for equipment financing. For instance, a poultry farmer in Salisbury could use an equipment financing loan to finance new processing equipment, while a construction firm in Frederick might use one to acquire a new excavator.
Since the equipment itself acts as collateral for the lender, equipment financing loans can be easier to obtain than unsecured loans. Additionally, they may often come with more favorable terms.
SBA Loans
Private lenders are the actual issuers of SBA loans, but this financing is partially guaranteed by the U.S. Small Business Administration. That federal backing reduces the lender’s risk, so the loan conditions may permit lower down payments and longer repayment terms. If you qualify, these Maryland business loans are available through numerous banks and credit unions.
Below are the types of SBA loans that may be the most useful for small businesses.
• The SBA 7(a) loan is very flexible: Amounts can range from $500 to $5 million. It’s suitable for covering working capital, refinancing debt, or purchasing supplies.
• The SBA 504 loan is specifically meant for companies to use on major fixed assets, such as commercial real estate or heavy equipment. The maximum amount is between $5 million and $5.5 million.
• The SBA Microloan is meant to help with short-term needs and can be useful to companies that need startup loans. You can borrow up to $50,000 and the maximum repayment term is seven years.
Using an SBA loan calculator may help you estimate what your loan costs might be for different kinds of SBA funding.
Recommended: Small Business Financing Guide
How to Apply for a Small Business Loan in Maryland
Applying for a Maryland small business loan takes preparation and attention to detail. You’ll need to provide prospective lenders with a clear picture of your company’s financial health and a well-developed plan for how their funds would be used.
Here’s a step-by-step breakdown of how to apply for a small business loan in Maryland.
Define Your Loan Purpose and Amount
Before you begin contacting lenders, you will want to have a precise understanding of your funding needs. You should be able to articulate exactly how much money your business needs, why, and how the funds will generate a return. A specific proposal, such as “$50,000 to expand our lab’s testing capacity by 30%,” demonstrates to lenders that you’re thinking strategically and exercising financial discipline.
Know Your Credit Score
When reviewing your Maryland business loan application, prospective lenders will usually pay particular attention to your company’s credit profile. They’ll probably scrutinize your personal credit scores, too: Traditional banks often require a credit score for a business loan in the range of 680 or higher. Other lenders, like online banks, may be willing to look at slightly lower scores.
Because of your scores’ importance, it may be beneficial to review your credit reports before you apply so that you can find any errors and have them fixed. Having this information will also let you be sure you fully understand your financial situation before you submit your application for a Maryland small business loan.
Gather Your Key Documents
Sending in an application package that’s organized and complete can speed up the review process and show a potential lender that you’re reliable and motivated. Requirements vary by lender, but you should usually expect to provide the following:
• Credit report
• Income statement
• Bank statements
• Budget
• Income tax returns (both business and personal)
• Business plan
• Collateral valuation and supporting documents (which may include titles, deeds, or invoices)
Compare Lenders and Loan Offers
When you’re considering Maryland small business loans, shopping around can help you find the financing that best suits your needs, since different banks may offer very different options on term loans, for instance. It’s also smart to compare options from multiple kinds of sources, including small local banks, large national institutions, and online lenders.
As you review financing proposals, it may be helpful to use a business loan calculator to estimate the monthly payments for different options. It’s also a good idea to look closely at the Annual Percentage Rate (APR) of each loan to understand its true cost.
Submit Your Application and Await Approval
Once you’ve filled out the loan application form and gathered your supporting documentation, you should be ready to submit the application package. After that’s done, you’ll need to wait for the lender’s response. This can take as little as two days in some cases, but may require several weeks in others.
Tips for Improving Your Loan Approval Chances
You might be able to increase your odds of securing a loan by taking steps to strengthen your business’s financial profile before you apply. Lenders typically want to see evidence of your company’s stability as well as its ability to repay the loan. Presenting a financially strong profile may help you in the approval process.
Here are some steps to consider trying:
• Be sure that you’ve got a realistic business plan with detailed financial projections.
• Work to strengthen your business and personal credit scores by paying down your current balances and making timely payments.
• If you have collateral available, consider offering it as security to potentially bolster your application’s chance for approval with certain Maryland business loans.
Other Funding Options for Maryland Small Businesses
If a traditional loan doesn’t seem like a good fit, there are other ways you may be able to fund your business. Maryland’s entrepreneurial ecosystem provides several alternative paths to obtain capital. One of these options may align better with your company’s specific stage of growth or industry.
Small business grants are a highly sought-after funding option because you don’t have to repay them, and you may be able to access one in Maryland. For instance, the Maryland Agricultural and Resource-Based Industry Development Corporation (MARBIDCO) provides grants (as well as loans) to new and existing businesses. And TEDCO (Maryland Technology Development Corporation), which provides seed funding for technology startups, also offers some grants. Additionally, you can search national databases like Grants.gov for federal programs relevant to your industry.
Crowdfunding is another potentially viable route, allowing your company to raise smaller amounts of capital from a broad base of supporters online.
Additional Business Resources in Maryland
Success in business typically requires more than just capital. It also takes expert guidance and a supportive community. Fortunately, Maryland has a robust network of resources designed to help small business owners navigate challenges. The Maryland Small Business Development Center (SBDC) can be a helpful resource, offering no- and low-cost advising at locations across the state.
As for mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, the Governor’s Office of Small, Minority & Women Business Affairs provides specialized training and procurement assistance, as well as networking opportunities. Engaging with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing a Maryland small business loan can be the deciding factor that lets your company expand and prosper. The process may seem daunting, but it’s not impossible for a focused entrepreneur. By defining your goals and utilizing state resources, you should ultimately be able find the right financing solution for your business.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
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FAQ
How do I get a small business loan in Maryland?
To apply for a Maryland business loan, start by defining your funding needs and checking your credit scores. Next, gather essential documents like your business plan, tax returns, and bank statements, to help you prepare and submit your application. Finally, compare options from various lenders to find the best terms for your Maryland small business loan.
Can I get a startup business loan with no money?
This can be challenging, since most lenders require an owner’s investment. However, some SBA microloans designed for startups have lower capital requirements. Another possibility is to look for business grants, which provide funding that doesn’t need to be repaid.
How hard is it to get a small business loan in Maryland?
The degree of difficulty involved depends on factors like your business’s financial health, time in operation, and credit history. Traditional bank loans can have strict qualifications. Online lenders may offer more flexible requirements, making them a more accessible option for many Maryland businesses.
What is the easiest type of business loan to get approved for?
Loans secured by collateral, such as equipment financing loans, are usually easier to obtain because the asset lowers the lender’s risk. Short-term loans and invoice financing from online lenders also typically have less stringent requirements.
What credit score do I need for a small business loan?
Requirements vary, but for traditional bank and SBA loans, a personal credit score of 680 or higher is often preferred. However, some online lenders may be willing to approve applicants with scores in the low 600s. Bear in mind that higher scores can result in better approval odds and lower interest rates.
What can I use a Maryland small business loan for?
You can use a small business loan for almost any legitimate business purpose. Common uses include purchasing inventory, buying equipment, funding marketing campaigns, or refinancing debt. However, using small business loans for personal expenses is prohibited.
Are there any small business grants available in Maryland?
Yes, grants are available from a variety of sources in Maryland. For instance, the Maryland Agricultural and Resource-Based Industry Development Corporation (MARBIDCO) provides grants, as does TEDCO (Maryland Technology Development Corporation). You can also search national databases like Grants.gov for federal programs relevant to your industry.
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