by Angela Merkert, Executive Director, AFLEP

With the challenges in the financial system—banks closing, fintech gaining market space, interest rates rising—lending for small businesses is decreasing. One recent business article reported that the U.S. loan approval rate for small businesses by big banks dropped to 13.5%, according to the Biz2Credit Small Business Lending Index. They also reported that small business applications had only 18.7% approved by small (community) banks. The rate of credit union approvals was 19.8%. The rates of approvals have been decreasing for all banks, dropping .4% for each entity March to April. (Albuquerque Journal, May 2021, “Less Lending.”).

What does this mean for New Mexicans with dreams and plans who need capital to make them real?

Although the figures for New Mexico are not available, there is no reason to believe that these figures don’t apply to loan approval rates here—and may be even lower. Entrepreneurs then reach for higher interest loans via the internet or credit cards, borrow from family and friends, or their dreams are diminished or let go. Start-ups and business expansions become stalled or not even begun.

Small businesses employ more people in New Mexico than midsize and large businesses. These businesses deserve support, especially in our rural communities. Community wealth grows as businesses develop and thrive, increasing the tax revenue available to access funding of community projects for roads, clean water, libraries, medical centers, and public safety equipment. All are facets of local economic prosperity and provide a foundation for the health and well-being of people who live in the community and surrounding region.

Image: Cafe Rio Pizza in Ruidoso, NM. Photo by Fevin Patel.

We can do better, New Mexico. An increasing number of economists are offering alternative models to our economic system that are more strongly based on values and the inclusion of more people’s needs rather than the maximizing of profit for the few. We have extreme inequality because we have supported policies and regulations that allow it.

According to Rana Foroohar, author of Homecoming: The Path to Prosperity in a Post-Global World, between 2022 and 2034 there will be about 991 million farm and ranch acres turning over to new owners, 40% of the U.S. mainland. If the current trend continues, large agriculture corporations will be purchasing that land as investments along with other countries. China is a current major investor in agriculture now in support of food security for its population. During the pandemic, pork prices increased early when China required their pork processing investments to divert produce to China rather than selling through their prior outlets in the U.S.

New Mexico cultural history may reject that investment trend, which will mean that for farms to be sustainable, strong local and regional markets will be required, reducing food exports to other parts of the U.S., and imports to the state. That will require more infrastructure for food processing and distribution. Small steps are being made now.

Foroohar also addresses the emphasis that globalization makes on developing efficiencies rather than resilience. She advocates that if we are to cultivate more resilience in our economy, we need to place more focus and resources on local and regional community development rather than on globalization. As we learned during COVID, we need more resilience in our food system—from cultivation to processing to distribution. This shift of focus points toward the need for investment in small and midsize businesses.

What’s missing to advance these needs? Capital to expand those facilities. Keeping our revenue safe, local, and working for New Mexicans and their community prosperity is a major AFLEP goal. We must do more to support businesses that will sustain families and keep them in their respective communities. Join AFLEP and help to advance equitable access to capital for rural community development and enhanced local prosperity. Share this message with friends, volunteer to engage your community leaders and legislators, contribute toward advancing this initiative. YOU can help to make a difference in the well-being of our communities, our fellow New Mexicans.