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Chapter 3
(House Bill 601)
AN ACT concerning
Economic Development – Small Business Guaranty Fund – Alterations
FOR the purpose of providing that authorizing the Maryland Small Business Development
Financing Authority to authorize the provision of a guaranty under the Small
Business Guaranty Fund may be supported by the full faith and credit of the State
of Maryland or approved in a certain other manner; and generally relating to the
Small Business Guaranty Fund.
BY repealing and reenacting, with amendments,
Article – Economic Development
Section 5–540(a)
Annotated Code of Maryland
(2024 Replacement Volume and 2024 Supplement)
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
That the Laws of Maryland read as follows:
Article – Economic Development
5–540.
(a) (1) The Authority may use the Fund to guarantee up to 80% of the principal
of and interest on a long–term loan made by a financial institution to an applicant only if:
(i) the applicant meets the requirements under § 5–541 of this
subtitle and has not violated § 5–545 of this subtitle;
(ii) the loan amount is $5,000 or more and the maximum amount
payable by the Authority under the guaranty does not exceed $2,000,000;
(iii) the loan is used for:
1. working capital;
2. refinancing the applicant’s existing debt;
3. acquisition and installation of equipment;
4. making necessary improvements to real property that the
applicant leases or owns in fee simple; or
Ch. 3 2025 LAWS OF MARYLAND
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5. acquiring real property that the applicant will own in fee
simple if the property is to be used in the applicant’s trade or business for which the
guaranty is sought and the financial institution or the Authority places a lien on the
property;
(iv) the loan matures within 10 years after the closing date of the
loan; and
(v) the interest rate does not exceed the monthly weighted average
of the prime lending rate prevailing in Baltimore City on unsecured commercial loans, plus
2%, as determined by the Authority.
(2) A GUARANTY PROVIDED UN DER THIS SECTION MAY :
(I) BE SUPPORTED BY THE FULL FAITH AND CREDI T OF THE
STATE OF MARYLAND; OR
(II) BE APPROVED IN ONE O F THE FOLLOWING FORM S:
(2) THE AUTHORITY MAY AUTHORI ZE THE PROVISION OF A
GUARANTY UNDER THIS SECTION IN THE FOLLO WING FORMS:
1. (I) AN IRREVOCABLE LETTE R OF CREDIT;
2. (II) AN OFFICIAL TREASURE R’S CHECK;
3. (III) FUNDS ON DEPOSIT IN AN ESCROW OR OTHER
DEPOSITORY ACCOUNT; OR
4. (IV) ANY OTHER LEGAL INST RUMENT PROMISING A
FINANCIAL INSTITUTIO N RESTITUTION OR REI MBURSEMENT FOR ITS L OAN LOSSES,
WITHIN THE LIMITS OF THE GUARANTY .
(3) ANY TERMS AND CONDITI ONS GOVERNING THE IN STRUMENTS
DESCRIBED UNDER PARA GRAPH (2)(II) (2) OF THIS SUBSECTION M AY NOT BE SO
ONEROUS AS TO DISCOU RAGE THE FINANCIAL I NSTITUTION FROM OFFE RING THE
LOAN.
[(2)] (4) (i) The Authority may only approve a guaranty under this
section if the Authority determines that the loan to be guaranteed will have a substantial
economic impact.
(ii) To determine the economic impact of a loan, the Authority may
consider:
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1. the amount of the guaranty obligation;
2. the terms of the loan to be guaranteed;
3. the number of new jobs that the loan will create; and
4. any other factor that the Authority considers relevant.
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
October 1, 2025.
Approved by the Governor, April 8, 2025.