MBI Business Centers Inc., a Rockville-based computer retailing chain that has been struggling through financial difficulties for the past year, yesterday filed for protection from its creditors under Chapter 11 of the federal bankruptcy law.

The company took the step after its chief lender, Maryland National Bank, found MBI in default on provisions of its loan agreement and refused to give the company any more money. MBI said it would look elsewhere for new financing, something it has been attempting with little success for several months.

The company also said it had lost $13.8 million in its second quarter ended July 31 on $20 million in sales. In the second quarter a year ago, MBI posted a $180,000 profit on $30.8 million in revenue. Last year, MBI ranked as the 35th largest company in the Washington area, measured by revenue.

MBI, which has 20 stores on the East Coast, will continue operating, according to Ronald Watkins, the company's chairman. Under Chapter 11 of the federal bankruptcy code, a company may continue to operate while it attempts to reorganize under supervision of the bankruptcy court. During the process, it is protected from legal actions by its creditors.

"We're all very positive. We think there's some real options that we have," Watkins said in an interview. "We'll be doing it under the protection of the court now, and that has some advantages."

MBI's stock, which already had lost half its value so far this year, plummeted $1.56 a share yesterday to 56 cents in over-the-counter trading.

MBI's bankruptcy filing comes even as the computer retailing business is undergoing a revival after a couple of years of disappointing results. But MBI, which listed the federal government as one of its biggest customers, has been hurt by the aftershocks of its temporary loss a year ago of a disputed contract to operate three computer stores for federal agencies.

The company won back the contract in February, but MBI said in its statement yesterday that the three stores revived slowly, thus reducing the company's revenue from government sales to $1.4 million in the second quarter from $2.6 million a year earlier.

MBI's commercial sales were also off sharply in the quarter, to $17.4 million from $26.8 million a year before, because suppliers cut back on shipments to the troubled company as losses mounted. "As a result of losses reported in recent periods, many key vendors have reduced their credit lines to the company," MBI said in a statement. "This has significantly affected product flow. Consequently, delivery performance has been adversely affected, resulting in lost sales."

The company said it had been operating in violation of certain covenants in its loan agreements with Maryland National for at least two months, but that it had received permission to do so from the bank. However, MBI said, Maryland National notified the company on Wednesday that it was formally in default on the loan provisions.

Maryland National Bank officials declined to comment on MBI's situation yesterday.

"They didn't call the loan, they just said they wouldn't add any more to what we already owed them," Watkins said in an interview. "Without those funds, it makes it very difficult for us to pay our vendors and others."

Watkins said that as a result of the bank's action, checks issued by the company this week to employes and vendors were "bouncing all over the place." He said the company would ask the bankruptcy court to quickly release funds from MBI's bank accounts to cover the payroll checks.

Figures released by the company yesterday illustrated the depth of MBI's recent financial problems. In addition to the deep decline in revenue and the huge loss, MBI said its working capital had dropped $14.6 million to a deficit of $7.1 million in the quarter ended July 31. Its assets were listed at $31.2 million; its liabilities are $38.3 million.

Despite the one-third drop in sales, the company's cost of sales rose during the second quarter to $24.8 million from $22.1 million the year before. MBI said the cost-of-sales figure for this year's quarter included a $5.5 million charge to cover the cost of an inventory reevaluation and writeoff. In June, the company held an auction to sell obsolete, damaged and excess inventory, getting $1 million for about $3.4 million worth of inventory, according to Watkins.

He said the auction allowed the company to better evaluate its remaining inventory, prompting the writeoff. The company has had other major inventory writeoffs in the past year, as well, which Watkins said helped worsen the company's financial condition.

MBI said its long-term debt had increased to $9.9 million as of July 31, from $3.6 million the year before. However, it said, it had reduced the outstanding balance on its line of credit from Maryland National to $9 million from $16.4 million during the second quarter.