Small businesses in New Mexico grappling with the economic fallout from COVID-19 would be eligible for low-interest loans they wouldn’t commence repaying for a few years under a bill a key Senate committee unanimously endorsed Thursday.
“This is a huge piece of work that fits right into what we’re trying to do as a Legislature on a bipartisan basis, which is help recover,” Senate Majority Leader Peter Wirth, D-Santa Fe, said about Senate Bill 3, which amends and extends the Small Business Recovery Act of 2020.
Last year’s legislation made $400 million available for loans for small businesses affected by the coronavirus pandemic, which resulted in shutdowns mandated by Gov. Michelle Lujan Grisham. It also sparked a variety of restrictions, such as limiting restaurants, bars, breweries and other establishments that serve food to takeout and delivery services only.
Despite the need for financial relief, less than $40 million was loaned under the program.
Sen. Jacob Candelaria, D-Albuquerque, who is sponsoring the reauthorization bill, said the terms were “too restrictive.”
Only businesses that could demonstrate a 30 percent gross revenue decline in both March and April 2020 were eligible to apply, he said.
The reauthorization bill broadens “the universe of firms that could potentially benefit from this very low-interest, below-market financing,” he said.
A business would only need to demonstrate “to the satisfaction of the New Mexico Finance Authority that they have undergone a substantial reduction in revenue or operations due to the COVID-19 pandemic” under his bill, Candelaria said.
“That is a very large universe of New Mexico small businesses, entrepreneurs and others who can now access this financing,” he said.
The original legislation only allowed businesses to use the loan proceeds for general operations. The reauthorization bill passed Thursday by the Senate Taxation, Business and Transportation Committee would allow businesses to cover capital improvements stemming from the pandemic, such as the construction of an outdoor patio.
“The revised bill also allows businesses to spend these loan proceeds and invest them in assets that will improve and grow the business’s e-commerce and sales capacity,” Candelaria said.
The bill would increase available funding from $400 million to $500 million. Since less than $40 million was loaned under the original legislation, “the effect of SB3 is to make an additional $460 million available for loans originated before 2023,” according to a fiscal impact report.
In addition, loan terms would no longer be fixed at five years but could be up to a 30-year variable term at the discretion of the finance authority. Loans would accrue no interest, and borrowers wouldn’t have to make payments for the first three years.
“Under the original bill, interest began to accrue immediately once the loan was taken out,” Candelaria said, adding the revised bill also would raise the maximum amount of a loan from $75,000 to $150,000.
Though committee members questioned whether the loan terms should be shorter than 30 years and whether borrowers should start making payments sooner than three years, ideas Candelaria was receptive to, they said the revamped loan program would provide needed relief to New Mexico businesses.
“I understand what you’ve been trying to do for small business: You’re trying to step in and repair the damage that’s been done by our governor, and I appreciate that,” said Sen. Craig Brandt, R-Rio Rancho.
Wirth defended the governor, saying she wasn’t to blame for the pandemic.
“I do want to push back a little bit on Sen. Brandt and his continuing effort to brand this all on the governor,” Wirth said. “We’ve had a national response that’s been required given the pandemic and given the extraordinary economic impact of this at all levels, and I’m very thankful to our governor and the lives that have been saved because of the approach she’s taken, so we can have that debate. But the reality is our businesses, our working families, need help, [and] they’re getting it from the state. We have stepped up in June, in November, and we’re about to do it again.”
Jason Espinoza, state director of the National Federation of Independent Business, said a $100 million direct grant program created by lawmakers during the special session in November was a “welcome relief” for business owners. But it left thousands of businesses in the cold, highlighting the importance of Candelaria’s bill.
“It’s important to note that only 6,756 businesses out of more than 14,000 that applied actually received the grant, and those grants, on average, were $15,000,” he said. “That means only a fraction, really less than 5 percent of New Mexico’s 160,000 businesses, were able to get a grant. This revamped Small Business Recovery Act loan program provides increased flexibility that will make it more accessible to small-business owners.”