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.

Reporter

Jens Gould covers politics for the Santa Fe New Mexican. He was a correspondent for Bloomberg News in Mexico City, a regular contributor for TIME in California, and produced the video series Bravery Tapes.

(2) comments

Chris Mechels

Good luck getting these "loans" paid back.... Just a way to raid the Permanent Fund, which they have been longing to do. We will really miss John Arthur Smith, one of the few sane heads in the Legislature. Might as well just let Michelle print money and hand to to friends, like Trump. This is just a our way of printing money. MLG will hopefully be put on trial at some point. But, this IS New Mexico, where the innocent are put on trial by the criminals. Good Sunshine tho...

George Welland

MORE CORPORATE WELFARE? Unlike the poorly conceived and badly administered federal Paycheck Protection Program (PPP), at least the state's Small Business Recovery Act of 2020 is more of an actual loan (albeit virtually interest free, it's still not a blatant hand out) and rightly allows 80% of the loan to go for non-payroll expenses. However, Senate Bill 3 (from the recent special session) also froze unemployment fund contributions for all state employers to pre-pandemic levels (sparing them a scheduled increase and ignoring this year's jump in claims for calculating their experience ratings). Another pay-off went to the SBA, so they can earn up to $3, 250.00 per loan application that they help process! The recent "special session" was aptly named as "special interests" didn't skip a beat feathering their nests and promoting their agendas... meanwhile not a single state law was passed to reform the state's jobless benefits program and liberalize payments (only federally financed CARES Act enhancements were adopted). I 've explain in detail how state laws could be liberalized in posts on other articles about unemployment and the local economy... and will repeat them here for the benefit of those who missed them and may be interested (otherwise, thanks for reading this far, but I'm not holding my breath for the governor or the legislature to do anything for workers who have lost their jobs, to wit:).

Despite the Families First Coronavirus Relief Act (FFCRA) and Coronavirus Aid Relief & Economic Security Act (CARES) to liberalize state unemployment insurance (UI) laws, none of New Mexico's UI laws have been amended; and the lack of action by state officials is disturbing; but New Mexico's UI program should have been changed a long time ago to pay all who are unemployed (all except those fired for cause or quit without good reason). Ordinarily very few of the jobless get benefits or ever bother to seek assistance and that's why coverage needs to be expanded at the state level.

I repeat, "PAY ANY WORKER WHO WASN'T FIRED FOR CAUSE, AND THOSE QUITTING FOR COMPELLING REASONS." It'd be good health and economic policy to pay people to just stay home until Covid-19 is better understood. Contrary to employers who use workers as props to protest closures, such closings may better serve everyone. Sadly, the $600.00 federal bonus is a casualty of the unsubstantiated claim it deters recipients from seeking work? As for the demagoguery of paying bonuses to those who return to work, would that include payouts to next of kin for hospital and/or funerary costs, to balance granting businesses immunity from Covid lawsuits? Arguably, the state needs to liberalize UI laws in order to facilitate stay-at-home orders, particularly for workers in the hospitality and tourism industries. Perhaps there could be more relief for non-essential businesses like bars and tattoo parlors, but only if they stay closed. Health hazards masquerading as commerce (that were unable to adopt sanitary procedures despite government handouts) should be allowed to fail. Workers from those industries could be trained to perform new needed services from contract tracing to child care and tutoring (or even perform volunteer and community service instead of looking for traditional low paying service sector jobs). With growing income inequality; and rising housing and health care costs, there's a need for greater economic security; but short of guaranteed income and health care, then liberalizing UI may be the only way to deal with business cycles, national emergencies, and poverty.

Unfortunately, our UI programs are intentionally complex, punitive, and designed to delay and deny benefits in order to keep payroll taxes low and subject employees to the whims of their employers. Although the $600.00 federal bonus may be gone in whole or part, state laws can still be changed to help individuals and the economy. The current system of helping individuals and their families is just a feel-good component of the program; because it's not sufficient without the federal bonus and additional weeks; but the real point of UI (since its inception, albeit now only because it's greatly expanded under the CARES Act) is to improve the overall economy by helping as many individuals as possible!

Current UI laws punish workers who quit to take care of family members, unless directly due to Covid, while quitting due to other illnesses don't qualify, or lack of transportation, or typical household emergencies. Even if your spouse is injured in a car accident and you quit because you don't have approved leave to care for him or her, then you'll be disqualified from UI. Until Covid, everyone was disqualified for quitting to care for ill dependents, and many remain disqualified until they purge the disqualification. There are only a few (federally mandated) personal circumstance for quitting, that allow benefits; and again, these are very few*; but during a pandemic there should be very few reasons to NOT pay benefits. e.g., discharge for cause and quitting without good reason! If you quit without notice (let's say to go fishing), you'd be disqualified from benefits, just as if you quit to take care of an aging parent, but in either case you could re-qualify. The original disqualification can be purged by working again, earning five times your weekly benefit amount, and filing to re-open your claim if you're not at fault for the new separation. The problem with this is it entices employers to collude with employees to game the system (maybe subsidizing a group's hunting trip) or worse, large scale fraud! Meanwhile, single parents with kids never re-qualify as they become indentured servants to temporary help firms. The same could be true for someone who quits to care for an elderly relative to keep them out of a nursing home (to avoid Covid). Even in normal times the notion of ensuring perpetual temporary servitude makes the system appear forgiving but belies the practical reality that many forego seeking benefits unless they know in advance that they're eligible. The chance of being disqualified cause many to forego filing a claim until they're eligible and need UI, rather than repeating the application process. Thus, being able to purge a disqualification is rather meaningless from the start and more of an administrative convenience for the state UI office and staffing agencies. Shockingly, a refusal to accept certain jobs over fears of infection has even been grounds to stop paying UI!

Politicians and employers in this state must know what's going on; but they do nothing or are satisfied with the present arrangement, even during a pandemic or recession when there are no jobs (hence the work search requirement was waived); so a denial of benefits awaits those who quit, until they meet the impossible task of finding another job, earning five times their weekly benefit amount, and avoid having to quit again? BUT HOW DO DISQUALIFIED WORKERS RE-QUALIFY DURING A PANDEMIC WHEN THERE ARE NO JOBS TO PAY ENOUGH TO REMOVE THE DISQUALIFICATION! Furthermore, what's the point, since there is no retroactive payment of weeks claimed for previously disqualified weeks, clearly the whole re-qualification process is a ruse? This has been pointed out to state officials, but apparently their attitude is, "Let them eat cake, if they can find it at the food bank!" The compassionate and reasonable thing to do is to grant benefits to those who quit for compelling personal reasons for as long as the pandemic exists (to coincide with waiving the work search and paying the "waiting week"). The mere appearance of being compassionate does not help the individual, but more people with actual income supports the entire economy. Remember this if the school year doesn't resume as normal! Additionally, a requirement to stay home could reduce or disqualify benefits for those who fail to wear masks or attend large public gatherings (in other words the carrot and stick of UI laws could be to promote public health as much help individuals and the economy).

Life under a pandemic is reaching a point where closing things down again without liberalizing jobless benefits would be both cruel and folly! The corporate welfare of the Paycheck Protection Program (PPP) temporarily paid employers to keep workers on the job (usually at reduced hours with make-work of cleaning while exposing themselves to others, instead of preparing for new ways of doing business), but employees should have been allowed to go home, stay safe, and take care of their families (and receive the higher UI they'll need). Eviction moratoriums and subsidizing a couple of months of wages was wasted because we didn't understand the virus or proper quarantine and protection, but if lock downs had been instituted earlier and longer, then we'd might have reduced the unemployment rolls, along with hospitalizations, and deaths. The impact of clothing more workers with greater economic security through liberalized UI laws is analogous to everyone wearing face masks, it literally covers more people and protects the entire population. Congress rightly increased and expanded jobless benefits, although PPP expenditures were dubious, but hopefully Congress will provide more direct relief to workers. Likewise, New Mexico's UI laws need to be reformed to pay workers who quit for valid personal reasons (even if only temporarily during the pandemic or as partial awards). Thereby the UI program could promote the true interests of the entire state by paying jobless benefits as much as for job loss through no fault of one's own personal situation; plus promote public health for adhering to a quarantine; and reducing the social cost of caring for workers' families as well as the macro-economic risks to their landlords and other creditors.

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Footnote* - The few non work-related personal reasons are: quitting due to pregnancy; relocating with a military spouse who's been transferred; & domestic abuse (although the Unemployment Insurance Modernization Act of 2009 also encouraged states to adopt eligibility rules for taking care of sick family members).

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