Last month, Marlin Steel acquired an advanced new MFDC automated welding machine to expand its production capabilities. Capable of finishing welds faster and with fewer heat stress deformities than a standard automated welder, this machine is one of only five units in existence, and the only one outside of Germany.
Marlin Steel also has the support of the Maryland Department of Business and Economic Development (DBED) to thank for it.
Business Loans and Business GrowthWhen a business such as Marlin Steel is looking to grow, whether that means adding new employees, new equipment, or new facilities, that means spending money. In most cases, a small business simply doesn’t have enough free capital to drop a seven-figure sum of money to pay for a new acquisition. This is where loans come into play.
To secure the money needed to make a major expansion, many small businesses rely on loans from banking institutions. However, there is more to getting money from a bank than just applying for the loan. A bank needs to have a reasonable certainty that they’ll see a return on their investment, and the sheer amount of money typically involved in a business loan means that bank has to be extra careful to minimize their risk of losing money.
For a typical example, take a look at home mortgages. Here, the bank is supplying a significant sum of money so that a home buyer can complete their purchase, even though the buyer doesn’t have the entire sum of money for the value of the house in their account. The bank is leveraging their confidence in that person’s future earning potential against the money the bank is putting up in the short term. However, if the home buyer is unable to pay the loan, the bank assumes ownership of the property bought using the loan. This way, the bank can re-sell the home to someone else to recoup their money.
With a business loan, on the other hand, a bank might have more difficulty getting their money back if the borrower is unable to pay. Houses are generally accepted as being a sound investment, and are relatively easy for a bank to sell and convert into liquid assets. However, with a business loan, the money can be used for any number of things, including tools, computers, and even payroll. Tools and computers can depreciate quickly in value after mere months, let alone years, and selling such equipment can be difficult in comparison to selling property (as there are many more people who are looking to buy homes that can afford them than there are ones looking for million dollar automated manufacturing equipment).
Because of the fact that banks may have a harder time recovering their money if a business loan falls through, businesses have a much harder time securing loans than home buyers do. This is where the support of organizations such as the DBED can be a huge help.
How Maryland’s DBED Helped Marlin SteelOver the last few years, Marlin Steel has added over $4,000,000 in new manufacturing equipment. Each time a loan would be taken out to cover the costs of the new equipment, and then that loan would be repaid as Marlin’s production capacity increased and more orders were filled.
When Marlin Steel was applying for a loan to cover the costs of the new MFDC welder, the Maryland Department of Business and Economic Development helped Marlin secure the loan by backing it with a $500,000 loan guarantee through their Maryland Industrial Development Financing Authority (MIDFA) program. This cut the bank’s risk on the 1.5 million dollar loan by a third, making it much easier for the bank to justify making the loan.
Using the money from the loan, not only did Marlin Steel manage to acquire a new MFDC welder, two new jobs were added as a direct result. That’s two more people who will be able to support their families and contribute to the tax pool thanks to the loan guarantee supplied by a state organization.
Global Market CompetitionGoing forward, the addition of this new welder and the new personnel will make Marlin even more competitive on the global market, and better equip the company to handle the demands of clients so that more orders can be filled more efficiently, bringing more business to the Baltimore area and enabling further growth.
Dominick Murray, the Secretary for DBED noted that “Marlin Steel Wire is a tremendous example of how a company has evolved to meet the growing demands of a global economy,” referencing Marlin’s continued investments in adapting to ever-changing market conditions and using automation to grow market share since the company moved to Baltimore back in 1999.