F. Leroy Pacheco, CEO, The Loan Fund

Sandra Monica has a passion for working with children. That’s why after 15 years as an employee, Monica decided it was time to start a day care center of her own.

Starting out was no easy task but with her husband’s support and financing from The Loan Fund, Monica opened Kid’s Castle Child Development Center in Las Cruces. The center has helped alleviate New Mexico’s shortage of daycare providers by offering early education to children six weeks to 12 years of age. Kid’s Castle serves more than 100 children and employs approximately 25 full-time teachers.

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Kim T. Blueher, Director of Lending, WESST

Asking for a loan is a type of negotiation. As with any negotiation, an entrepreneur is more likely to succeed if she understands the needs of the other party: the lender.

It also helps to know the language of lending. A knowledge of terms like assets, liability, net worth, gross or net profit, collateral, receivables, payables, amortize and depreciate tells the lender that a borrower understands the financial aspects of his business.

Would-be borrowers will need to answer personal questions about their credit history, business plan and personal stake in the business. Continue reading →

Leslie Hoffman, V.P. of Lending and Client Service, ACCIÓN New Mexico ∙ Arizona ∙ Colorado

Emmy Award-winning documentary filmmaker Lena Carr needed money to buy filmmaking equipment and to travel to Arizona to wrap up work on a video about the life of an 18-year-old Native American man — a project she began when her subject was 6 years old.

The owner of Indian Summer Films turned to ACCIÓN New Mexico ∙ Arizona ∙ Colorado, a nonprofit lender, two years ago for her first loan of $500. ACCIÓN approved the loan for several reasons, including the social benefits of Carr’s chosen profession, which also provides her an income through DVD sales. As collateral for that loan, Carr offered a traditional Navajo dress woven by her mother — a sentimental possession that demonstrated her commitment to her business and her lender.

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Marci Rulon, CEO, Southwest Federal Credit Union

Whether an entrepreneur is starting a new business or expanding an existing venture, applying for a loan can be daunting. A good business plan makes the process less intimidating and more likely to succeed.

In writing a business plan, the business owner should consider her business from the lender’s perspective and demonstrate why she is a good credit risk.  The business plan should include the following sections:

Executive summary: This one- or two-page narrative appears first but is written last – after the owner has prepared the other components. The summary highlights the plan’s contents and explains why the loan is needed. Continue reading →

Paul Goblet, Investment Advisor, NMSBIC

The New Mexico Small Business Investment Corp. was formed in 2001 to provide capital to the state’s small businesses. The original charter was narrowly defined and the organization had relatively little money to lend, but legislative amendments over the years allowed NMSBIC to formalize cooperative agreements with financial professionals and alternative lenders.

The organization wasn’t formed to compete with traditional banks that best understand local markets and clients and remain the best source of capital. It exists to help those businesses that lack access to traditional banking sources or have been turned down by commercial lenders. These include businesses with logical and creditworthy loan requests that were deemed too small or too risky or not well suited for the bank’s lending categories. The borrower’s collateral might have been weak or unacceptable or their credit scores might have been too low.

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Owner occupied businesses eager to take advantage of deflated real-estate prices to purchase the building they’ve been leasing, to buy land to construct a building or to renovate existing facilities are finding plenty to like in the U.S. Small Business Administration’s 504 loan program.

The program was created in 1980 to help small, independently owned companies — the biggest job-creators in the country — secure the fixed assets they needed to expand and modernize.

Because the federal government underwrites 40 percent of each loan — with the business owner contributing as little as 10 percent – many traditional lenders are more willing to offer a first mortgage for the remaining 50 percent of the loan amount. The business owners can get money they otherwise might not be able to get at lower-than-market rates for owner occupied fixed asset financing, allowing them to conserve cash for other operating costs.

What it buys

A 504 loan can be used for anything that constitutes a “fixed asset.” It can be used to buy land or a building or to construct a new facility or renovate an older one. Other eligible site improvements include road building, installing utilities, adding a parking lot and landscaping. Durable machinery and equipment with a 10-year work life can also be purchased.
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F. Leroy Pacheco, CEO, The Loan Fund

The credit crunch is a new nightmare for some borrowers, but entrepreneurs and start-ups of modest means were only too familiar with being turned down for traditional financing even before the economy went sour.

Private alternative lenders such as The Loan Fund have helped such borrowers build self-sufficient businesses for years. Since the Wall Street meltdown, we’ve been getting more referrals from loan officers at local banks who know we have more flexibility than they do and can make a loan or authorize a line of credit of up to $1 million.

Bankers aren’t bad people; our board of directors includes several of them. They want to help business owners, but their hands are often tied by federal regulations and mandates from above — and those restrictions have only increased recently. One banker told me applicants must now have a minimum credit score of 650 and three years of profitable financial reports before the bank even considers making a loan.

Because we’re a private group that balances social benefits and fiscal responsibility, The Loan Fund has more flexibility when it comes to helping our clients get (and keep) going. One such client, Carley Preusch of Silver City, was turned down by four banks that considered her profit margin “too low.” We loaned her $125,000 in July to expand her assisted-living center.
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John Woosley, CPA and U.S. Small Business Administration New Mexico District Director

At a time when banks are loath to lend money to other banks, New Mexico’s rural entrepreneurs may wonder if it’s even worth trying to obtain the credit they need to stay in business.

That’s where the Small Business Administration and its partners come in with programs to help launch and build rural businesses and to help rural innovators overcome the special problems posed by distance from customers, markets and workers and the lack of a telecommunications infrastructure.

SBA’s financial assistance consists of guarantees to banks to share the risk of lending to entrepreneurs. Just this year the agency instituted the Rural Lender Advantage initiative to foster economic development in rural areas by making it easier for smaller community banks to partner with the SBA to finance small businesses. With a maximum loan amount of $350,000, expedited approval, limited documentation requirements and the federal government’s guarantee that the bank won’t lose its entire investment in case of default, this tool makes community banks more willing to help New Mexico’s rural entrepreneurs pursue their business goals.

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Paul F. Goblet, Financial Advisor, NM SBIC

There’s no doubt that the foresight of current and past legislatures and governors has attracted equity capital to New Mexico businesses, especially in the technology sector.

While more companies could probably benefit from having additional equity capital on their balance sheets, outside equity investments are not for every business. Investors can be difficult to attract, and dealing with them can be time consuming and expensive.

So how does a small company obtain the capital it needs to grow, even at a modest pace?

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