New Mexico's loan fund for small businesses mostly unused
LAS CRUCES - The Small Business Recovery Act of 2020, passed by the New Mexico Legislature during a special session in June, allocated $400 million to provide low-cost loans for businesses and nonprofit organizations impacted by the coronavirus pandemic.
“Big challenges require big responses. This may be the biggest stimulus New Mexico has ever passed,” Rep. Marian Matthews, D-Albuquerque, a cosponsor of the bill, said during the signing ceremony in July.
But four months later, only about $20 million of the original $400 million has been tapped into.
“None of us have ever designed a program like this for a pandemic, so it’s been a learning process,” Matthews said this week.
Debbi Moore, president and CEO of the Greater Las Cruces Chamber of Commerce and chair of the statewide chamber association, said there are several reasons why businesses have not tapped into the fund.
For one, the loans became available about the same time as grants through the federal CARES Act.
“No one is going for a loan when they can get free money,” she said.
That grant program is about ready to wrap up, Moore said.
Beyond the issue of timing, there are also problems with restrictions written into the bill that prevented some businesses from qualifying, Moore said.
To apply for the loans, a business must have had an annual gross revenue of less than $5 million in 2019, and be able to demonstrate that its gross revenue dropped by 30 percent or more in April and May, compared to those same two months last year. Nonprofits have to show a 10 percent decline.
Every business in the state did not suffer its loss at the same time, Moore said. By limiting losses to just those two months, many businesses harmed by the pandemic did not qualify for the loan.
She also said the state needs to simplify the process of applying for a loan.
“The applications are very complicated, and many times people don’t want to do it,” she said. “We have spent hours walking people through the loan process.”
Rep. Micaela Lara Cadena, D-Mesilla, said there are other changes legislators want to make so more businesses can take advantage of the program. One is an expansion of the definition of “loss.”
“That could include the loss of employees, not just the loss of revenue,” she said.
And, they are considering lowering the residency requirement for owners from 80 percent to 51 percent, she said. Many business owners have passed a share of their business on to children who live out of state, Cadena explained.
“We are working out deals, so that when we get to the special session, we will be able to get in and out, and handle our business safely,” she said.
Rep. Matthews said she supports all the proposed changes.
“We were responding to what we saw at the time,” she said. “As we moved on, we decided that as this pandemic evolved, we needed to be flexible enough to evolve with different situations.”
Looking toward the regular session in January, Matthews said legislators need to start planning for what comes after a vaccine, when life gets back to normal.
“With vaccines coming, there will be a point in time where our small business community goes from trying to survive to actually growing again,” Matthews said. “Some of the things we’re thinking about is how can we change the program so we can help the business community go from survivor mode to helping them get in the growing mode and re-employ their workers. We’re looking at a number of options.”
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For now, the governor recently imposed new restrictions on businesses as the state’s number of COVID-19 cases, hospitalizations and deaths all continue to grow.
“This hit of the shutdown is devastating to our microbusinesses and our mom-and-pops,” Moore said. “It’s going to be hard, because we’re hitting the holiday season.”
She said this special session needs to provide a lifeline for struggling businesses.
“It’s do or die right now. The next few weeks are crucial,” she said. “We’re being very respectful and very much honoring those who lost their lives. We’re walking a very fine line. But it’s tough out there.”
Gov. Michelle Lujan Grisham has called for a brief special session next week, but there is disagreement as to whether one is needed.
The purpose of the special session is to appropriate funding from the CARES Act that will revert to the federal government if it is not budgeted by Jan. 1, according to Sen. Gerald Ortiz y Pino, D-Albuquerque.
“There are several millions of dollars that haven’t been budgeted yet. That would be the whole purpose of the special session,” Ortiz y Pino said Nov. 18 during an interview on Las Cruces community radio. “We’re going to be in desperate enough shape. We don’t want to lose it.”
But David Abbey, director of the Legislative Finance Committee, said his staff has spent months analyzing the federal rules, and they are all convinced that the federal funds can already be accounted for in the state budget.
“We do not agree that it’s use it or lose it,” he said.
Lujan Grisham said she wants to see the funds used for additional grants for small businesses and assistance for unemployed workers.
The special session is slated to begin Nov. 24 and is not expected to last more than one day. The Roundhouse will be closed to the public because of COVID-19 concerns.
Walt Rubel can be reached at email@example.com.