When free markets are in free fall, the federal government can intervene and keep the country and economy running by simply printing more money and running a deficit. That’s what lawmakers chose to do last fall to shore up collapsing financial markets.
Small businesses don’t enjoy such powers. They can’t print their own money, and most realize that running a business in the red is risky even in the short term.
Businesses owners face unprecedented challenges in today’s far-reaching recession. Many are being forced to reevaluate where they stand and where they hope to be in the future, and some are being forced to ask for help from consultants or lenders, even though the prospect is embarrassing to them.
Most businesses in New Mexico have fewer than 25 employees, and most of these are owned and financed by the founder and family members. Their growth depends on the business’s success and financial stability; when one or both of these are threatened, the business often loses its ability to get credit at affordable terms.
Just as many people got used to living beyond their means — borrowing money for homes, cars and routine expenses — many businesses over the past decade were willing to finance growth by making use of the ample credit that was available. Banks were comfortable with using a business’s assets — buildings, equipment and other long-term assets — as collateral to support such loans, which were repaid over five to 20 years and allowed the business a foundation for taking on additional debt.
When revenues began to fall and profits began to dwindle, monthly loan payments became increasingly difficult to make. Missed payments to creditors and taxing agencies hurt credit scores, making it more difficult and expensive to borrow money again. If a business is ultimately unable to borrow money, it often ceases to exist.
Time for Plan B
While getting a share of the financial bailout is just as unlikely as winning the lottery for the average New Mexico business owner, there are ways to improve a business’s chances of surviving — even in a recession as deep as this one.
Small Business Development Centers throughout the state can help entrepreneurs with a business or marketing plan and budget development. They can help cash-strapped businesses prepare a loan request and direct them to potential funding sources among the state’s many alternative lenders, including The Loan Fund, ACCION New Mexico and WESST Corp. These organizations lend money to many small businesses, and their terms are usually more flexible and their costs more affordable than those of traditional banks.
Federal entities like the Small Business Administration also have programs throughout New Mexico designed to help small businesses succeed.
These agencies and organizations are here to help — and their existence is proof that the resilient and proud small-business owners of New Mexico have no reason to feel ashamed if they’ve been run aground by economic forces beyond their control. Asking for help is how we all survive.