A program intended to help small business in New Mexico struggling with economic hardship during the coronavirus pandemic is not working as planned, critics say.
The Small Business Recovery Loan Fund was created by lawmakers in June during an emergency legislative session and set aside $400 million. To qualify, business owners must show more than a 30 percent decline in revenue in April and May of this year compared to the same time frame in 2019.
“It just doesn’t make sense,” Carol Wight, executive director of the New Mexico Restaurant Association, said. “They certainly didn’t have any business people in the room when they were discussing it. I know we were not given the opportunity to comment on the bill.”
Since the fund opened in early August, only $19.8 million has been awarded to 415 small businesses and 40 percent of applications have been rejected. According to the New Mexico Finance Authority, 85 percent of the rejected applications could not show the required 30-percent drop in revenue.
Wight noted that one of her members, who owns two award-winning restaurants in Santa Fe, had one application approved but the other was denied because his second restaurant did not open until July of last year.
“He’s suffering the same at both locations,” she said. “These businesses aren’t suffering because they aren’t good owners. This situation is not their fault.”
Rob Black, president of the New Mexico Association of Commerce and Industry, said the time frame for showing economic injury is “pretty limited,” noting that many small businesses suffered greater losses during the summer months compared to April and May after more restrictions were put in place.
The terms of the loans can also prove problematic for owners. The interest rate is one-half of The Wall Street Journal prime rate on the date the loan is approved. That rate is currently 3.25 percent. Business owners who are approved must make payments on just the interest for three years, but face a balloon payment on the third anniversary of the loan approval.
The outstanding balance can also be converted to a standard loan with monthly principal and interest payments for another three years.
“A lot of my members are telling me they aren’t sure if they’ll even be around in three months, let alone three years,” Wight said.
A separate $50 million federal grant program opened up the same week as the loan fund, which could be one reason why not as many businesses have applied for loans. The state is working to boost advertising to increase visibility of the loan program, according to Gov. Michelle Lujan Grisham’s office.
The average loan has been $47,759, with a high of $75,000 and a low of $585.
Originally posted by The Center Square. Republished with permission.