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Gov. Martin O'Malley's State of the State address this week drew mixed reactions from business leaders, with some appreciating the emphasis he's placing on helping small businesses.

O'Malley (D) covered measures such as the formation of a small-business credit recovery program, loan guarantees on small-business deals, a job tax credit and expanding the tax credit on redevelopment of historic properties.

"It's encouraging to see that Gov. O'Malley understands how tough it is for small businesses," said Judy Stephenson, president of Gaithersburg software-training company Officepro.

While she questioned whether the $3,000 job tax credit would have much effect on hiring, Stephenson supported the credit-recovery program and loan guarantees.

"Having more access to credit is really important," she said. "That has become harder for small businesses to get, and become more expensive."

Among the private-sector lenders that have increased business lending recently is Mid-Atlantic Federal Credit Union of Germantown. Mid-Atlantic significantly expanded its commercial lending division's staff in March and expects to lend $45 million to 75 small companies this year, after lending $32 million to 30 local businesses in 2009.

The credit union is working more with the Small Business Administration these days, Steven Smits, vice president of operations for Mid-Atlantic's commercial lending division, said in a statement. Before 2009, the credit union made only a handful of SBA-backed loans.

"We've already had five SBA loans approved this year — and we're only a month into 2010," Smits said.

Last week, several business officials testified in a committee hearing against a bill proposed by O'Malley that would expand unemployment eligibility and benefits requirements so the state can qualify for $126.8 million in federal stimulus funds and temporarily reduce businesses' payments to the trust fund.

The state budget problem was exacerbated by the O'Malley administration's continued spending on new programs during better economic times, said state Senate Minority Leader Allan H. Kittleman (R-Dist. 9) of West Friendship. In a response to O'Malley's address, Kittleman called on legislators to further reduce government spending, as well as to repeal a sales tax increase and other tax increases, as ways to help businesses.

O'Malley said that for four consecutive years he has submitted a budget that falls within strict spending affordability guidelines.

"For the first time in more than 40 years, the budget I propose to you this year calls for lower general fund spending than four years ago, and it will bring total spending cuts and reductions this term to $5.6 billion," O'Malley said.