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State business loan program starts next week

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A state-administered small business loan program begins accepting applications next week.

The Small Business Recovery Loan Fund was created in July after Senate Bill 3 passed the New Mexico Legislature during the special session. A similar bill also had been introduced in the House.

“Essentially, what we are trying to do is that we wanted an economic stimulus package,” said Rep. Marian Matthews, D-Albuquerque, during a Wednesday video session about the loan fund. “And who were really hurting in our economy? It was our small businesses,” she said.

Matthews is one of five representatives and senators who co-sponsored the bills.

The idea was to help the smaller businesses that might not be eligible for federal relief, she said, noting that small businesses employ 49% of the state’s employees.

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The $400 million Small Business Recovery Loan Program is funded by a portion of income to the severance tax permanent fund, which has about $5.61 billion in assets.

The loan program is run by the New Mexico Finance Authority. It is functioning as the lender and is using the loan terms laid out by statute.

Applications for business loans will be accepted on a first-come, first-served basis starting Wednesday and remaining open until Dec. 31.

“We are preparing for significant demand,” said Marquita Russel, chief executive officer of the Finance Authority. “Our hope is that people have enough optimism in the economy that they want to take advantage of the bridge loan that this really does provide. But it is hard to know how much demand will be there on day one. It really does get back to optimism and the financial constraints that they are currently under.”

She added that the system has been tested to ensure that it can handle a large volume of applications.

She also said that the loans have been designed by legislators to be easy to obtain and easy to repay.

According to the final text of the Senate bill, some of the criteria for eligible businesses and nonprofits is that they had annual revenues of less than $5 million in 2019 and experienced, as a result of the pandemic, more than a 30% decline in revenues in April and May 2020, compared to the previous year.

The maximum loan would be $75,000. Collateral or personal guarantees are not required, although creditworthiness will be evaluated. The interest rates are half of prime, which is the fixed rate for the life of the loan. That rate is now 1.625%, Russel said.

Annual payments begin the first year after the loan was funded, but for the first two years, only interest is required to be paid. If the business or nonprofit is unable to repay the principal and remaining interest after three years, the loan can be converted to a three-year loan with monthly payments of principal and interest due. No fees or penalties are associated with early payoff of loans.

“They did that to make sure that businesses didn’t have barriers to getting the funding they needed to carry themselves through the crisis,” Russel said. “It should be very affordable for a lot of businesses that are trying to get themselves back on their feet after this crisis.”

Russel added that the Finance Authority designed the application process to be efficient.

The agency is using a third-party vendor with software that has built-in logic, so that applicants not meeting the requirements will not be able to submit the application. Representatives of New Mexico lending institutions have agreed to work with the Finance Authority to review supporting documentation submitted to ensure that the application materials are correct.

Once an application is submitted, funding decisions are expected within 10 days.

Additional information about eligibility, loan uses and the application process are available from the Finance Authority, www.nmfinance.com, 505-984-1454.

The Small Business Recovery Act of 2020 also changed the way unemployment insurance costs are calculated so that businesses will not be penalized for high unemployment due to the pandemic. In addition, it created an emergency loan fund for counties and cities that could begin later in the year, depending on what happens with gross receipts taxes.

Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 351, or at reporter02@rdrnews.com.