A Maryland community bank holding company has opened a commercial finance company in suburban Washington to target government contractors and other small businesses. Mason-Dixon Bancshares opened an office in Bethesda to offer accounts receivable financing, a service that businesses often use before they qualify for traditional bank financing. With accounts receivable financing, a form of asset-based lending, the lender essentially issues a line of credit secured by a business' receivables. Asset-based lending is a financing niche with high profit potential and equally high risk. Banks traditionally have shunned it, but that's changing. "This is a way for the bank to go one floor below where we were used to doing business," said William Brown, managing director of the new division. Mr. Brown said the accounts receivable financing will help Mason-Dixon attract small businesses that don't have established bank relationships, rather than trying to steal customers from other banks. "As the companies we deal with move toward traditional bank financing, we will already have a relationship built up over several years," he said. Accounts receivable financing is less expensive than factoring. However, interest rates of prime plus four percentage points are not unusual.

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