Hundreds of business to get loans from Small Business Recovery Act

Nearly 500 New Mexico businesses were approved for loans from the Small Business Recovery Act of 2020, members of the New Mexico Finance Authority (NMFA) Oversight Committee learned Friday during a virtual meeting.

The committee, made up of members of the New Mexico Legislature, examined economic development in the state during the COVID-19 pandemic.

The Small Business Recovery Act was passed during a special legislative session in June and was signed into law July 7 by Gov. Michelle Lujan Grisham.

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The Act allocated $400 million in funds from the New Mexico State Severance Tax Fund to provide loans to New Mexico businesses and nonprofits that have experienced financial hardship due to the public health order resulting from the COVID-19 pandemic, read a State of New Mexico news release.

According to Adam Johnson, chief of program operations for the NMFA, the average loan amount was $46,754, as of Oct. 8.

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The smallest loan was $582, and the largest loan was $75,000, Johnson said.

He said 22 percent of the applications have come from the accommodation and food services industries in New Mexico, followed by retail at 19 percent and arts, entertainment and recreation at 10 percent.

Eligible businesses and nonprofits may borrow two times their average monthly expenses up to a maximum of $75,000. The measure sets the interest rate at one-half the prime rate on the day the loan is made. The initial loan period is three years, with interest-only payments for the first three years.

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The loan program is limited to businesses and nonprofits with 2019 annual gross revenue of less than $5 million and whose 2020 April and May income dropped 30 percent or more compared to the same month in 2019. 

The online application and more information on the program can be found at www.nmfinance.com. 

During Friday’s meeting, State Sen. Joseph Cervantes (D-31) expressed concerns over tax implications and the default rate of the Act.

“Both in terms of numbers of default as a percentage of loans granted and then perhaps a default rate on the percentage of dollars actually loaned,” he said.

NMFA Chief Executive Officer Marquita Russel said the organization didn’t have an expectation for volume or demand, let alone for defaults.

“I know the Legislative Finance Committee (LFC) had put in just some idea if things went into default what the impact would be, I don’t know of any projections for default rates that were done with a clear education on that,” she said.

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Cervantes said since money is being used from the Severance Tax Fund, the state has an obligation to see a return on that fund.

State Sen. Ron Griggs (R-34) suggested fraternal organizations like the Elks Lodge, Moose Lodge and the Veterans of Foreign Wars could use some help from the Act.

“Those guys were not eligible for any help I think either federal or state and really put a lot of them in a bind. So, if we can consider adding them to those who might be available we ought to see if there is a way, because those guys they don’t have many sources of revenue if we can help them we just ought to,” he said.

The committee was gathering input for pandemic and budgetary recommendations for fiscal year 2022.

Mike Smith can be reached at 575-628-5546 or by email at MSmith@currentargus.com or @ArgusMichae on Twitter.