In early August, the state launched an initiative supposed to be a serious lifeline for small companies struggling to remain afloat in the course of the pandemic.
But almost two months later, the applying for the New Mexico Small Enterprise Restoration Mortgage Fund was disappointing, even amid an financial downturn.
And of the businesses that attempted to take part, virtually half had been turned down.
“The intention is sweet,” mentioned Lawrence Becerra, a restaurant proprietor in Santa Fe who noticed an software rejected. “The execution was not significantly favorable.”
Meant to supply low-interest loans to assist companies and nonprofits resist COVID-19 public well being restrictions that shut down or prohibit operations, the Small Enterprise Restoration Mortgage Fund has been the some of the publicized developments of the extraordinary legislative session in June.
Governor Michelle Lujan Grisham referred to as this system an “vital step” in serving to companies recuperate when she signed a regulation creating this system over the summer time, and the enterprise neighborhood has expressed help for the measure. when it was introduced.
It has definitely helped some corporations acquire entry to extra funds. However for the reason that software course of started on August 5, solely $ 19.8 million in loans have been accepted, or about 5% of the $ 400 million put aside for this system by means of December 31, based on New Mexico Finance. Authority, which administers this system. .
As well as, 40 % of small companies that utilized for loans underneath this system had their software turned down.
“It is completely absurd,” Becerra mentioned of the numbers.
Companies should present declining revenues
Many of the denied claims – 85%, based on the Monetary Authority – had been rejected on account of a requirement included within the laws that enterprise homeowners and attorneys deem too prohibitive.
Companies should present that their revenues fell by greater than 30% in April and Might of this yr in comparison with these months of 2019. Many companies can’t do that, although they nonetheless suffered heavy losses attributable to the pandemic.
“They’re very particular and a bit ruthless,” mentioned Marquita Russel, chief government of the Monetary Authority, of the necessities. “This 30 % drop, which could be very clear within the regulation, has been a serious downside.”
Take Becerra, which owns the Sazón and Sassella eating places in Santa Fe, each of which gained the Wine Spectator Award of Excellence earlier this yr.
He was in a position to get a mortgage for the primary however not for the second, though incomes fell in each after the state closed eating places in the beginning of the pandemic.
Certainly, though Sassella was created in March of final yr, its doorways had been solely formally opened in July – Becerra due to this fact doesn’t have the figures for April and Might 2019 to enter into the request. mortgage.
Becerra mentioned the monetary authority’s on-line platform doesn’t enable him to file a declare if he doesn’t enter these two numbers.
“I perceive that they needed to set up screens that may enable them to successfully handle the method,” he mentioned. “The issue is, they made these screens so restrictive that they fully eradicated many deserving recipients.”
Utility quantity is decrease than anticipated
The sluggish total demand for this system is shocking given the tough scenario some companies discover themselves in and the favorable lending phrases provided by the laws.
Rates of interest on loans are set at half the prime charge, and the preliminary mortgage interval for debtors is three years, with curiosity funds solely throughout that interval.
The Monetary Authority had been operationally ready to obtain between 5,000 and seven,500 functions within the first three months of this system. Nonetheless, that is greater than half of that point and he solely obtained 800.
“We definitely did not have that type of quantity,” Russel mentioned. “It is decrease than we anticipated.”
Russel mentioned his crew was attempting to determine why extra small companies have not utilized for loans, analyzing county-level tax information to seek out out if there are particular sectors of the financial system that have not made a transfer. request.
“Eight hundred functions is not quite a bit contemplating the variety of small companies in New Mexico,” Russel mentioned. “Why aren’t there extra apps? That is one of many issues we’re attempting to determine.”
Russel, small enterprise advocates and lawmakers have all mentioned that one of many primary causes for low curiosity in this system is probably going the reluctance of enterprise homeowners to tackle debt at a time of such nice financial uncertainty.
“Folks actually really feel the stress of taking up extra debt,” mentioned Brian DuBoff, director of the New Mexico Small Enterprise Improvement Middle in Santa Fe.
The longer term is unsure
As a result of enterprise homeowners do not understand how lengthy the pandemic will final, some do not know if they are going to have the ability to keep in enterprise for the long run, and this unpredictability makes it tough to get a mortgage, Rep. Daymon mentioned. . Ely, co-sponsor of the regulation that created the mortgage program.
“I do not suppose there’s a lack of capital,” Ely mentioned, D-Albuquerque. “I believe there’s a concern that they aren’t right here in the event that they have no idea the longer term.”
A separate $ 50 million grant program funded by federal support may additionally play a task, the governor’s workplace mentioned when requested why demand has been gradual for the mortgage program.
Small companies might have determined to attend to use for the mortgage program till they discover out if they are going to obtain the grants administered by New Mexico municipalities, Lujan Grisham spokeswoman Nora mentioned. Meyers Sackett.
Demand for the grant program was ample. The state has obtained functions for small enterprise grants totaling $ 106.9 million, greater than double the funding allotted, Appearing Finance Secretary Debbie Romero mentioned final month.
“There was the brand new grant program, which was introduced the identical week the mortgage program started,” mentioned Rob Black, CEO of the New Mexico Enterprise and Business Affiliation. “I believe persons are confused. They usually thought, ‘Possibly if I get a grant, we do not have to repay the debt.’ ‘
Get rid of Confusion About Small Enterprise Loans
Lujan Grisham’s workplace mentioned the state was working to spice up publicity for this system to clear up any confusion about lending. He factors out that in contrast to debt issued by banks, program loans don’t require collateral or private ensures.
“Small enterprise homeowners can take out these loans with out worry of being personally liable if the worst involves the worst,” Sackett mentioned.
Small enterprise advocates mentioned they had been grateful that lawmakers handed the invoice and created the agenda in such a brief legislative session. However they need the necessities modified.
They are saying some companies had been turned down as a result of revenues did not drop no less than 30% in April and Might, however it did within the following months.
Some, for instance, have needed to cancel annual occasions that usually happen in the summertime, that means they skilled bigger declines throughout that point than within the spring, Black mentioned.
“Your scope of proof of financial injury is kind of restricted,” he mentioned.
Russel mentioned his crew reached out to the entire companies whose functions had been denied to see if the monetary authority may assist them get the loans they had been on the lookout for. In some instances, enterprise homeowners had been in a position to reapply and be accepted.
“We attempt to work in any manner we are able to with these individuals,” she mentioned.
However there may be nothing the establishment can do when candidates are deemed ineligible based mostly on guidelines handed by the legislature and now a part of state regulation. It will take a legislative session to amend them and there may be not one other scheduled earlier than January.
“I believe it’ll in all probability be too late for lots of companies on the town,” Becerra mentioned.
Nonetheless, Ely mentioned he can be in favor of reorganizing the regulation within the subsequent session.
The governor’s workplace additionally mentioned it could be open to dialogue if lawmakers wished to broaden or alter this system.
“I believe it is value revisiting this subject in the course of the 60-day session,” Ely mentioned. “We are attempting one thing new and if there may be something too strict we must have a look at it.”