State launches $5 million small business fund

Program provides collateral assistance

Gov. Susana Martinez has announced a new $5 million fund aimed at providing collateral assistance for small businesses seeking loans.

The Credit Enhancement Program allows companies to obtain assistance for up to 50 percent of the loan’s principal value, to a maximum of $250,000. Loan proceeds can be used toward “any tangible or intangible asset purchase such as construction, renovation or improvements of an eligible place of business, start-up costs, working capital, franchise fees, equipment and inventory.”

In a press release, Gov. Martinez said the program will create “more jobs and opportunities for New Mexicans.” Economic Development Secretary Matt Geisel called it a tool that helps “hardworking New Mexico entrepreneurs thrive and create jobs in our communities.”

The program, funded by a grant from the U.S. Treasury Department, targets rural communities, manufacturing “and other core sectors,” according to the release.

A spokesman from the Economic Development Department said businesses are not required to repay funds from the program because the money is used by the bank as collateral and is never sent to the business directly. Asked by the Journal what would happen if a business owner defaulted on the loan, the spokesman said the state could be required to remit the money to the bank, though he noted that each business will be screened by both the state and the lending institution funding the loan.

He said the state could also place a lien on the business in that situation.

To be considered for collateral assistance, businesses must submit a loan enrollment form, eligibility questionnaire and supplemental documents, according to the program’s website. The supplemental documents include financial statements for the past three years, a business plan and financial projects for the next three years. For start-ups, personal tax returns from the owners may be requested by the state.

Preference is given to businesses located in rural areas, those that are owned by underrepresented groups like minorities and veterans, those that are creating new jobs and those that generate income from outside the state. Qualifying businesses must be located in New Mexico and employ 750 or fewer full-time employees, among other criteria.

More information on the program is available at gonm.biz.