The state launched a new loan program Wednesday aimed at helping small businesses withstand the difficulties caused by public health restrictions during the COVID-19 pandemic.
The $400 million Small Business Recovery Loan Fund was created by a bill passed by the Legislature during the special session in June and signed by Gov. Michelle Lujan Grisham last month.
“This is a cornerstone of our state’s response to the economic crisis unleashed by the COVID-19 pandemic,” Lujan Grisham said in a statement.
The program is one of several state efforts aimed at helping New Mexico businesses that have seen their revenues sapped by the pandemic.
The governor announced late last month that the state would allocate $50 million in federal stimulus funding toward local grants for small businesses. And early on in the pandemic, the state created a $100 million emergency loan fund for medium-sized companies.
The business community expressed support for the measure Wednesday.
“This sounds like a good program,” said Brian DuBoff, director of the New Mexico Small Business Development Center in Santa Fe. “The interest rate is great. This could be beneficial to a lot of New Mexico small businesses.”
Under the new loan program, eligible businesses and nonprofits can borrow two times their average monthly expenses up to a maximum of $75,000.
Interest rates will be set at one-half the prime rate on the day of the loan. The initial loan period for borrowers will be three years, with interest-only payments during that time.
In order to be eligible, businesses and nonprofits must demonstrate their income in April and May dropped 30 percent or more compared with the same months last year. They also must have had annual gross revenue of less than $5 million in 2019.
Banks are not directly involved in the program, like they were in the federal Paycheck Protection Program, but local industry leaders said they see value in the low-interest state loans, particularly as the last day to apply for a PPP loan is Saturday.
“The people who are out there need everything they can get to survive,” said Max Myers, Santa Fe market president for New Mexico Bank & Trust. “The PPP worked really well to give people oxygen to survive.”
Gary Lutz, the Northern New Mexico regional president at Century Bank, said the new loan program will give businesses a “straightforward way” to access funding.
“Currently, in the uncertain economic environment that we are all living through, any resources available to small businesses are helpful,” Lutz said.
Rob Black, CEO of the New Mexico Association of Commerce and Industry, said his organization began talking with state Rep. Daymon Ely, D-Corrales, in early April about a small-business loan fund.
“This is a very creative use of our permanent fund to invest in small businesses when they need it most,” Black said. “While it is a loan and not a grant, it is a very favorable loan.”
The Small Business Recovery Act of 2020 draws money from the state’s $5 billion Severance Tax Permanent Fund to offer the business loans.
The legislation was sponsored by Ely, Rep. Marian Matthews and Sens. John Sapien, Jacob Candelaria and Sander Rue.