With small businesses in New Mexico still struggling to cope with the COVID-19 pandemic, a new state loan program is designed to fill in the gaps in existing offerings.
Senate Bill 3, signed into law by Gov. Michelle Lujan Grisham on Tuesday, establishes a low-interest loan program for hard-hit businesses and local governments using funding from the state’s Severance Tax Permanent Fund.
The measure allocates $400 million to provide loans for struggling small businesses. Approximately $50 million will be used for loans to local governments.
Sen. Jacob Candelaria, D-Albuquerque, one of the sponsors of the bill, said the program is designed in part to help smaller, less established businesses, that may have had trouble getting funding through the Payroll Protection Program and other state and federal programs.
“We are a state of small business owners,” Candelaria told the Journal.
SB 3, passed by the New Mexico Legislature during the special session last month, allows businesses to apply for loans of up to $75,000.
Unlike the PPP, which converts to a grant if the recipient meets certain terms, borrowers must pay the state loan back in full.
The new program is far from the only option for businesses that have been hurt by the pandemic, but Anne Haines, president and CEO of the Albuquerque-based lender DreamSpring, said some federal programs aren’t set up to help very small businesses.
Haines said some lack established banking relationships, and don’t have easy access to necessary tax and payroll information required by the PPP.
“That has definitely been a barrier for many micro-businesses,” she said.
Marquita Russel, CEO of the New Mexico Finance Authority, which will administer the program, said it has a few benefits for smaller businesses.
The loans are limited to businesses and nonprofits with an annual gross revenue of less than $5 million and they don’t require businesses to offer collateral to secure the loan, he said.
Additionally, she said the inclusion of community lenders is designed to make it easier for companies without conventional banking services.
“Their intent was to provide a lifeline to small businesses,” Russel said.
Candelaria noted that the loan money can be applied to a wide range of operating costs, including utility bills.
“At the end of the day, this bill trusts more in the ingenuity and in the resilience of our New Mexico businesses,” Candelaria said.
Russel said the initial loan period is three years, with the annual interest rate set at half the Wall Street Journal’s prime rate on the day the loan is issued. The bill states that recipients must show that their April or May income dropped by 30% or more compared to the same month in 2019.
Russel said there are still details about the program that need to be ironed out, including the benchmark for creditworthiness, but added that a formal list of criteria for businesses looking to apply should be available later this month.
The program is expected to go live in early August, she said.
“We’re trying to get this stood up as quickly as possible,” Russel said.