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Farmers have chance for low-interest, state-backed loans

The Baltimore Sun

Forgive the members of the farming industry, the largest in Maryland by some measures, if they do not feel as though they have gotten the same treatment over the years as other businesses in the state.

Those in the industry likely do not know what it is like to be, say, General Motors, which received $10 million in public funds to help pay for its Allison Transmission plant in White Marsh.

Or, Marriott International, which landed a $9 million grant to help pay for sprucing up its Bethesda headquarters.

However, economic development is about to make its way to the cornfields, dairy barns, chicken houses and other farming operations around Maryland.

The Maryland Agricultural & Resource Based Industry Development Corp., a more modest version of the state's Department of Business and Economic Development, has opened for business.

Established by the General Assembly in 2004, the quasi-public corporation is designed to help farmers and agricultural and other rural businesses.

Low-interest loans will be available to young people who want to get into farming and to farmers who seek to expand their operation but who lack the financial resources to impress conventional lenders.

Typically, a farmer seeking a loan would go to a conventional lender. If the bank would finance only a portion of the request, the farmer can seek additional funds from the corporation, said Stephen R. McHenry, executive director.

The organization would charge 2 percent interest on most loans, McHenry said. This compares with the current prime lending rate of about 8 percent, which could result in a "blended" rate of about 5 percent.

"That could be enough to make a difference," McHenry said. "It could make a project viable. It could reduce a farmer's monthly payment enough to make a loan affordable."

Such a resource for farmers could help reduce the risk on commercial lenders.

"We will take the second position on loans," McHenry said. "This means that the banks will be repaid first. They will be paid before we are paid."

It could also reduce the cost of borrowing money, he said.

The corporation will do for farmers what the state's business and economic development department does for other industries, said J. Robert Frazee, president of MidAtlantic Farm Credit, the Westminster-based cooperative bank that is Maryland's largest agricultural lender.

"It could provide the help needed to make farms viable," he said. Frazee also is board chairman of the corporation. He said a livestock farmer could use a loan to establish a small slaughter shop on the farm.

A farmer might take advantage of a loan to open a retail outlet, similar to the ice cream stores that have been popping up on farms throughout the state in recent years.

The farming community did not benefit from the state economic development agency, said Phyllis Kilby, a Cecil County dairy farmer who opened an ice cream store on her farm.

"The state has not reached out to agriculture to assist it like it has other businesses," she said.

Legislation passed by the General Assembly last year required that $3 million in state funding go into the new corporation this year. Gov. Martin O'Malley included the money in his budget proposal that is before the legislature.

State funding is scheduled, but not guaranteed, each year until 2020, at which point the corporation hopes to be self-sufficient, McHenry said.

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