Small Business Loans
Small Business Loans in New Mexico
There are more than 172,000 small businesses that call New Mexico home. Together, they account for around 99% of all enterprises in the state. From the vibrant art markets of Santa Fe to the oil-rich Permian Basin and the agricultural valleys of the Rio Grande, these companies are the backbone of the local economy.
Whether you’re launching a film production service in Albuquerque or expanding a chile farm in Hatch, finding small business loans in New Mexico can be a key step in building your company. Here’s what you should know about securing financing.
Key Points
• The New Mexico Finance Authority (NMFA) manages the Smart Money Loan Participation Program, purchasing portions of bank loans to help lower interest rates for underserved and rural borrowers.
• The New Mexico Collateral Assistance Program (CAP) 2.0 pledges cash to cover collateral shortfalls, with a special focus on industries like outdoor recreation, film, and sustainable agriculture.
• The Loan Fund, a nonprofit organization certified as a Community Development Financial Institution (CDFI), provides small business loans up to $350,000 to entrepreneurs who may find it difficult to qualify for traditional bank credit.
• The Women’s Economic Self-Sufficiency Team (WESST) offers specialized microloans and training to women- and minority-owned businesses that need smaller amounts of capital.
• Nonprofit Elevated Lending Certified Development Company (ELCDC) is a key partner for SBA 504 loans, helping businesses finance major real estate and heavy equipment purchases.
Popular Types of Small Business Loans in New Mexico
Entrepreneurs in the Land of Enchantment may benefit from a financial ecosystem that blends federal support with robust non-profit lending networks. The following sections describe the most common funding options available to business owners across New Mexico.
New Mexico Small Business Loan Programs
The state encourages economic growth through the New Mexico Economic Development Department (EDD) and the NMFA. They administer initiatives like the Collateral Assistance Program, which helps businesses secure financing even if they lack sufficient assets, and the Smart Money Loan Participation Program, which allows the state to purchase up to 49% of a loan, reducing the risk for local banks and encouraging them to lend to smaller and rural businesses.
There are also nonprofit programs that can be helpful. Entrepreneurs who may have difficulty qualifying for traditional loans can try the Loan Fund, a nonprofit Community Development Financial Institution (CDFI), which provides loans up to $350,000. Elevated Lending Certified Development Company (ELCDC) helps companies interested in SBA 504 loans. And the Women’s Economic Self-Sufficiency Team (WESST) makes specialized microloans and training available to businesses owned by women or minorities.
Term Loans
A term loan provides a small business with an upfront lump sum of capital. The business then repays the principal, along with interest, which is usually charged at a fixed rate, in regular payments over a specific period of time (the term). Since the funds come all at once, this kind of loan can be especially well-suited to funding large one-time investments. For example, a brewery in Las Cruces might use a term loan to expand its taproom.
Recommended: Small Business Loans
Business Lines of Credit
Unlike a term loan, a business line of credit can provide access to a pool of funds that you can draw from whenever you need to, up to a limit predetermined by your lender. Typically, you’ll pay interest only on the money you actually withdraw, and as you repay the balance, you’ll replenish the pool of funds so the money becomes available for you to withdraw again.
Lines of credit can be helpful for businesses that have seasonal lulls or uneven cash flow. A gift shop in Taos, for example, could use a line of credit to purchase inventory ahead of the summer tourist rush.
Equipment Financing
If your company needs a specific physical asset, like machinery, vehicles, or technology, you might want to think about applying for equipment financing. An oil field service company in Hobbs could use an equipment financing loan to acquire a new drilling rig, for instance, while a rancher near Roswell might use one to purchase a new cattle trailer.
Because the equipment itself acts as collateral for the loan, reducing the lender’s risk, equipment financing loans tend to be easier to obtain than unsecured loans. Additionally, they often come with more favorable terms.
Small Business Administration (SBA) Loans
Small businesses can obtain SBA loans from approved private lenders, but these lending staples are partially guaranteed by the U.S. Small Business Administration. This federal backing generally lowers risk for the lender, which may permit lower down payments and longer repayment terms. If you qualify, these New Mexico business loans are available through many banks and credit unions.
Below are the types of SBA loans that may be the most useful for small businesses.
• The SBA 7(a) loan is extremely flexible: Amounts range from $500 to $5 million. It’s suitable for covering working capital, refinancing debt, or purchasing supplies.
• The SBA 504 loan is specifically intended for companies to use to acquire major fixed assets, such as commercial real estate or heavy equipment. The maximum amount is between $5 million and $5.5 million.
• The SBA Microloan is meant to help with short-term needs and can be useful to companies that need startup loans. You can borrow up to $50,000 and the maximum repayment term is seven years.
An SBA loan calculator can help you estimate what your loan costs might be for different kinds of SBA funding.
How to Apply for a Small Business Loan in New Mexico
Applying for a New Mexico small business loan can require preparation and attention to detail. You’ll need to show lenders a clear picture of your company’s robust financial health and a well-thought-out plan for how you would use their funds.
Here’s a step-by-step breakdown of how to apply for a small business loan in New Mexico.
Define Your Loan Purpose and Amount
Before you start contacting lenders, it may be a good idea to have a precise understanding of your funding needs and goals. You should be able to articulate exactly how much money your business requires and how it will generate a return.
A specific proposal, such as “$50,000 to install solar panels to improve energy efficiency,” demonstrates strategic thinking and financial planning.
Know Your Credit Score
Prospective lenders may pay particular attention to your credit profile when reviewing your New Mexico business loan application, likely scrutinizing your personal credit scores: Traditional banks often require a credit score for a business loan in the range of 680 or higher. Other kinds of lenders, such as online banks, may be willing to consider slightly lower scores.
Because your scores are so important, it can be a practical idea to review your credit reports before you apply so that you can spot any inaccuracies and have them corrected. It can also help you be sure you fully understand your financial situation before you submit your application for a New Mexico small business loan.
Gather Your Key Documents
Providing a potential lender with a loan application package that’s organized and complete may speed up the review process and demonstrate to a potential lender that you’re reliable, efficient, and motivated. While requirements vary by lender, you should generally be prepared to provide the following:
• Credit report
• Income statement
• Bank statements
• Budget
• Income tax returns (both business and personal)
• Business plan
• Collateral valuation and supporting documents (which may include titles, deeds, or invoices)
Compare Lenders and Loan Offers
When you’re considering New Mexico small business loans, it could be helpful to shop around to find the funding that best suits your needs. That’s because different banks may offer very different options on the same products. It may also be a good idea to compare offers from multiple kinds of sources, including small local banks, large national institutions, and online lenders.
As you evaluate financing proposals, it can be helpful to use a business loan calculator to estimate the monthly payments for different options. It can also be smart to look closely at the Annual Percentage Rate (APR) of each loan to understand its true cost.
Submit Your Application and Await Approval
After you’ve filled out the application form and have your supporting documentation organized, you should be ready to submit the application package. Once that’s done, you’ll have to wait for the lender’s response. This can take as little as two days in some cases, but may require several weeks in others.
Tips for Improving Your Loan Approval Chances
Lenders typically want to see evidence of your business’s stability as well as its ability to repay the loan. Taking steps to strengthen your business’s financial profile before you apply may help you increase your chances of securing a loan. Here are some strategies to consider trying:
• Make sure you have a realistic business plan with detailed financial projections.
• Work to build your business and personal credit scores by paying down your current balances and making timely payments.
• If you have collateral available, consider offering it as security to potentially bolster your application’s chance for approval with certain New Mexico business loans.
Recommended: Small Business Financing Guide
Other Funding Options for New Mexico Small Businesses
If a traditional loan isn’t a good fit for your company right now, there may be other ways to fund your business. New Mexico’s entrepreneurial ecosystem offers several alternative paths to capital. One or more of these options could align better with your company’s specific stage of growth or industry.
Small business grants are highly sought after because the funds don’t have to be repaid, and grants are available in New Mexico. The Job Training Incentive Program (JTIP) offers to reimburse part of the cost of eligible workforce training, while the Women’s Economic Self-Sufficiency Team (WESST) helps entrepreneurs connect with various grant opportunities. National databases like Grants.gov can also be a source for federal programs relevant to your industry.
Crowdfunding may be another viable route. Crowdfunding platforms allow you to raise smaller amounts of capital online from a broad base of supporters.
Additional Business Resources in New Mexico
Business success often requires more than just capital. Typically, it also takes guidance and help from a supportive community. Fortunately, New Mexico has a healthy network of resources designed to help small business owners navigate their challenges. The New Mexico Small Business Development Center (NMSBDC) is a major resource, offering no-cost advising and low- or no-cost training at locations statewide.
For mentorship, local SCORE chapters can connect you with experienced business leaders who volunteer their time. Additionally, nonprofits The Loan Fund and DreamSpring both provide specialized consulting alongside their lending products. Engaging with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing a New Mexico small business loan can be an important factor that allows your company to expand and prosper. The process can seem daunting, but by defining your goals and utilizing state resources, you should be able to find the right financing solution for your company.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
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FAQ
How do I get a small business loan in New Mexico?
To apply for a New Mexico business loan, you can begin by defining what you need the funding for and checking your credit scores. Next, gather essential documents like your business plan, tax returns, and bank statements to help you complete your application for submission. Finally, compare offers from various lenders to find the best terms available to you for your New Mexico small business loan.
Can I get a startup business loan with no money?
Obtaining a startup business loan with no money can be challenging, since most lenders require an owner’s investment. However, some SBA microloans are designed for startups and may be more lenient on approval status. Another option is to research business grants, which provide funding that doesn’t have to be repaid.
How hard is it to get a small business loan in New Mexico?
The degree of difficulty tends to depend on your business’s financial health, time in operation, and credit history. Requirements for traditional bank loans can be rigorous, but online lenders are often more flexible, making them a potentially more accessible option for many New Mexico businesses.
What is the easiest type of business loan to get approved for?
Loans secured by collateral, such as equipment financing, are generally easier to obtain because the asset lowers the lender’s risk. Short-term loans and invoice financing from online lenders also typically have less stringent requirements than unsecured loans.
What credit score do I need for a small business loan?
Requirements vary, but for traditional bank and SBA loans, a personal credit score of 680 or higher is generally preferred. Some online lenders may approve applicants with scores in the low 600s. Bear in mind that higher scores can often result in better approval odds and lower interest rates.
What can I use a New Mexico small business loan for?
You can use a small business loan for almost any legitimate business purpose, but not for personal expenses. Common uses include purchasing inventory, buying equipment, funding marketing campaigns, or refinancing debt.
Are there any small business grants available in New Mexico?
Yes, grants are available from a variety of sources. The New Mexico Economic Development Department can be an excellent resource for finding state-level opportunities like the Job Training Incentive Program. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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