New loan program targeted at existing businesses in San Juan, McKinley, Cibola counties

FARMINGTON — Economic development officials in northwest New Mexico are trying to drum up interest in a revolving loan program targeted at small businesses that thus far has had no takers.

Michael Sage, the economic development manager for the Northwest New Mexico Council of Governments, said the fund was created when the council applied for and received a $900,000 grant last year from the U.S. Economic Development Administration to serve small businesses in San Juan, McKinley and Cibola counties. Loans ranging from $20,000 to $100,000 are available to businesses that have been operating for at least two years.

Sage and other local officials now find themselves trying to promote the program to small business owners in San Juan County after the first year of the program came and went without a single application received, much less approved.

“When we get up in San Juan County, we realize it’s ripe,” Sage said of the presentations he has been delivering about the program to local banks, chambers of commerce, economic development groups and other entities. “We think this could really help small businesses, especially those coming out of the pandemic.”

Sage said San Juan County is home to 2,400 businesses — twice as many as McKinley (900 businesses) and Cibola (300 businesses) counties put together. That means it is poised to benefit considerably more from the program than its two counterparts, he said.

“We’ve really put in an effort to deliver presentations,” Sage said, noting that he has emphasized to regional bankers that the program is designed to augment what they do, not compete with them.

“We’re looking for deals that are more on the cuff, people who maybe have a few blemishes on their credit report and don’t qualify for a bank loan,” he said.

That doesn’t mean the revolving loan fund will hand out money to anyone who asks for it. Sage said that a handful of small business owners in the area have inquired about applying for a loan, but for one reason or another, they were not in a position to formally begin that process.

Jim Cox, the deputy San Juan County manager who is one of five county residents who sits on the 12-member revolving loan fund committee that awards the money to qualified applicants, acknowledged he is a little discouraged by the lack of response. But he is hopeful that a renewed push to publicize the program will bring applicants out of the woodwork.

“I would encourage them to apply or just reach out to Michael to learn more about the program," he said.

Cox said the revolving loan fund potentially could have a significant impact on San Juan County, but the lack of applicants so far has been surprising, especially for the members of the committee he chairs.

“We’d be so excited to have one make it through to that (point),” he said.

Cox declined to speculate about why small business owners who would benefit from obtaining a loan have not gone through the process, calling it a large unknown. But he said he is afraid some of those who have applied for and been rejected for a loan by a bank in the past may simply have given up on the idea.

“We haven’t closed any deals,” Sage said. “I don’t know whether it’s just the (economic) climate or the fact that we’re coming out of COVID, but many businesses are very risk averse right now, and a lot of them don’t want to take on additional debt.”

Earning approval for one of the loans certainly is not easy. Sage said successful applicants cannot be operating a start-up business, they must show proof of a positive cash flow and they cannot use the money for construction. The loan money is designed to be used for working capital, machinery and equipment, real estate acquisition, tenant improvements or refinancing of existing business debts.

That last item is especially important, Sage said, noting that it is his fear that many business owners in the region have gotten themselves entangled in high-interest loans from online entities since the pandemic began to recede.

“An ideal applicant is somebody that we can provide relief to,” he said. “What we’ve seen, unfortunately, is a lot of online lending. Some of these businesses, because they’re mom-and-pop operations, don’t want to go to a bank and divulge their financials to people and then see them in the grocery store.”

Instead, Sage said, they take out loans from online lending operations that wind up charging them 50% or 60% interest.

“We want to compete against that,” he said.

The revolving loan program offers much lower interest rates, Sage said, which allows business owners to take that savings and plow it back into their business.

“But the business has to be cash flow positive,” he said, adding that the goal of the program is to unleash the value of small businesses.

That’s something that needs to happen across northwest New Mexico, Sage said, explaining that all three counties in the program have seen a population decline in recent years. Providing access to capital for entrepreneurs is one of the primary ways the Northwest New Mexico Council of Governments is working to reverse that trend.

“Our hope is to be able to move this money out and have a track record of success,” he said. “Then we could go back to the (U.S. Economic Development Administration) and say, ‘Look how fast we moved this money out — give us more.’”

Sage said the $900,000 in the fund does his organization no good sitting in a bank account. The idea is to put it to work helping entrepreneurs as quickly as possible.

“We know the need is out there,” he said.

For more information about the program, email sage at msage@nwnmcog.org or call him at 505-722-4327.

Mike Easterling can be reached at 505-564-4610 or measterling@daily-times.com.

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This article originally appeared on Farmington Daily Times: Fund offers loans of between $20,000 and $100,000 to small businesses