Small Business Loans in Maryland: What You Need to Know

Research different loan options available for small businesses in Maryland, including SBA loans, traditional bank loans, credit unions, online lenders, and alternative financing. Compare interest rates, terms, fees, and eligibility requirements to find the best fit for your business needs.

Collect all legal documents that establish your business entity in Maryland. This includes Articles of Incorporation (for corporations), Articles of Organization (for LLCs), Partnership Agreements, or Sole Proprietorship registrations. Lenders need these to verify your business's legal existence and structure.

Ensure you have a current Maryland business license and any industry-specific licenses or permits required for your business. Maryland requires most businesses to have a trader's license from the Circuit Court in the county where the business is located. Some businesses may need additional specialized licenses.

Compile comprehensive financial statements including balance sheets, income statements, and cash flow statements for at least the past 2-3 years (if available) and year-to-date financials. These documents should be accurate and professionally presented, as they will be scrutinized by potential lenders.

Create or update your business plan with clear information about your business model, market analysis, competitive advantage, management team, and detailed financial projections. Include how the loan will be used and how it will contribute to business growth or stability.

Collect business tax returns for the past 2-3 years and personal tax returns if you're a sole proprietor or if the lender requires personal guarantees. Ensure all tax filings are current with both Maryland and federal authorities, as delinquent taxes can disqualify you from loan approval.

Create a current accounts receivable aging report that categorizes outstanding invoices by time periods (e.g., current, 30-60 days, 60-90 days, 90+ days). This helps lenders assess your cash flow and collection practices.

Gather and review all business insurance policies including general liability, property, professional liability, workers' compensation, and any industry-specific coverage. Lenders often require proof of adequate insurance coverage before approving loans. Maryland law requires certain types of insurance depending on your business type, such as workers' compensation if you have employees.

Obtain your business credit report from major credit bureaus (Dun & Bradstreet, Experian, Equifax) and review for accuracy. Dispute any errors before applying for loans. Maryland follows federal regulations regarding credit reporting, including your right to dispute inaccuracies.

Carefully review the loan agreement provided by the lender. Pay special attention to interest rates, repayment terms, prepayment penalties, default provisions, and any covenants that restrict business operations. Consider having an attorney review this document before signing, as Maryland has specific usury laws that cap interest rates for certain types of loans.

Examine the promissory note, which is the legal document that outlines your promise to repay the loan according to specific terms. Verify that all terms match what was discussed with the lender, including the principal amount, interest rate, payment schedule, and maturity date.

Understand the implications of signing a personal guarantee, which makes you personally liable for the business debt if your business cannot pay. In Maryland, creditors can pursue personal assets if you default on a personally guaranteed loan. Consider negotiating limitations on the guarantee if possible.

Carefully review the security agreement that identifies which business assets will serve as collateral for the loan. Understand which assets you're pledging and the consequences of default. Maryland follows the Uniform Commercial Code (UCC) regarding secured transactions.

Be aware that your lender will file a UCC Financing Statement (UCC-1) with the Maryland Department of Assessments and Taxation to perfect their security interest in your business assets. This public notice informs other creditors about the lender's claim to your pledged assets. Verify the accuracy of the filing to ensure it only covers the agreed-upon collateral.

Ensure your business is properly registered with Maryland Business Express, the state's online portal for business filings. This registration must be current before taking out a business loan. You'll need to be in good standing with the state, with all annual reports and fees up to date.

Understand that Maryland has specific lending regulations that protect borrowers, including the Maryland Interest and Usury Law which caps interest rates for certain loans. If using an alternative lender or online platform, verify they are licensed to operate in Maryland through the Commissioner of Financial Regulation.

Create a compliance calendar that tracks all loan-related obligations, including payment due dates, financial reporting deadlines, insurance renewal dates, and any other requirements specified in your loan documents. Maryland law strictly enforces contractual obligations, so staying organized is crucial to avoid default.

Establish or refine accounting procedures to track loan proceeds and ensure they're used for the stated business purpose. Maintain clear separation between business and personal finances. This is not only good business practice but also important for tax compliance and potential loan audits.