The Band-Aid Loans

The familiar wooden figure of a voluptuous woman decked out in Western wear swings in the wind over an empty patio while, inside, an abandoned pool hall abuts a deserted dining room.

It's Friday night at Cowgirl BBQ, and there are other signs that things are seriously amiss: No servers hustle from the floor back to the kitchen, no bartenders holler your drink order over the din of music and laughter, no friends find the weak spots in your jokes.

Instead, a lone employee wearing a facemask waits at the front by the phone, handling to-go orders.

For the last two months, takeout is the downtown restaurant's only form of income. And it's not enough to support the business. In fact, each day the 27-year-old Santa Fe fixture stays open for takeout is another day it's losing money.

Like thousands of business owners in New Mexico and nationwide, co-owner and head chef Patrick Lambert applied for a loan through the federal government's Paycheck Protection Program (PPP). The money—which is to be used mostly on payroll for eight weeks, though a quarter of it can be spent on utilities and rent—is meant to keep Cowgirl afloat through the pandemic as COVID-19 continues to claim lives and economic fortunes.

"We're doing what we can to save [the restaurant] but we don't know, the future is so uncertain," Lambert tells SFR. "Even when we do reopen, no kiddie corral, no dancing, won't be able to be served while you're standing up, no pool hall… It's gonna be a different Cowgirl. We're a friendly, fun-loving place where people come to hang out with their buds, have a beer and chat, walk around and see their friends around the tables. That's all gone."

Many businesses have hazy futures. While federal officials aren't tracking exactly how many businesses have applied for the $2 trillion national loan program, 19,842 have been approved so far in New Mexico. Those approvals brought over $2 billion into the state in early April and May.

And the government won't say which businesses are receiving money as opposed to those that applied and were denied, clouding the picture of whether the loan program is working as intended.

There are so many other unknowns: the path the COVID-19 pandemic will take and ever-changing regulations around how to use the PPP loans. It appears more federal money is going to Republican-led states that moved quicker to reopen their economies.

Congress intended the money to be a bridge between the pandemic and whatever the other side of this looks like. But businesses in the state wonder whether this money will be enough to keep them open past the summer and, beyond that, whether the cash meant as a lifeline will leave owners saddled with debt.

The loans and ensuing regulations don't work for every type of small business—particularly in a place with an eclectic economic environment such as Santa Fe, with its reliance on everything from tiny restaurants to large art galleries to shops on the Plaza. PPP cash has been granted to nonprofits such as Homewise and Somos un Pueblo Unido as well as bigger operations like the Meow Wolf arts corporation, for example, which told workers it received over $6 million and still cut 201 jobs.

To plug the gaps in the federal program, the state of New Mexico is considering its own scheme for small business owners. That depends on how much money comes from the feds and the state's own shaky finances as oil and gas revenues continue to scrape around the bottom of the barrel.

What the numbers say

The US Small Business Administration, which oversees the PPP, doesn't track how many loans have been approved versus denied, making it impossible to know how many businesses that say they're in need are not getting help. The administration tells SFR there have been denials of PPP applications, just not how many.

In a state like New Mexico, where the SBA says there are about 154,257 small businesses, the number of approved loans so far represents only about 12% of those that are eligible.

An analysis by Reveal from the Center for Investigative Reporting found that of the 1.6 million loans doled out for small businesses in the first round of allotted federal money, states without strict and early stay-at-home orders got business loans at a higher rate.

Businesses in states that President Donald Trump won in 2016 received a greater share of the PPP funds than those won by Hillary Clinton. Trump won eight of the top 10 recipient states in 2016.

New Mexico is in the bottom 13 states in terms of the percentage of businesses that got loans.

Eleven of the bottom 15 states, ranked according to the percentage of businesses that received loans, voted for Clinton in 2016, the data shows.

In the first phase of the PPP, 8,277 loans were approved for a total of $1.4 billion coming into New Mexico's small businesses.

The second round of PPP money brought more loans for New Mexico but less money. Lenders across the state approved 11,565 loans for a total of $818 million going to businesses from April 27 through May 8, according to the SBA.

Only helping some

Cash is pouring into the state as banks and credit unions distribute money from approved loans to businesses. But the money works better for some than others. And the precise guidelines are still unclear on exactly what will be forgiven.

Because of that, Lambert remains cautious about spending the loan that he says amounts to less than $2 million.

"What we have is our loyal staff that haven't been laid off are working at 30% less," Lambert says. "There's all kinds of questions about this PPP loan, like, can I make those people whole again during that time? Can I give people hazard pay? Because, in fact, it is hazardous. There's a lot of things associated with the loan that we don't have guidance on and so I can't spend it that way until I know that it will be forgiven. Otherwise I'm stuck with six figures of debt."

On  top of ambiguous federal guidelines, the loans are not designed for businesses like restaurants that are either closed completely or operating in a very limited way, such as takeout only. Legislators and lobbyist groups in both Washington, DC and New Mexico realized that unique and locally-owned restaurants, a major attraction in Santa Fe, are going to need extra help to get to the other side.

In the nation's capital, the National Restaurant Association is pushing for a change in future stimulus packages for restaurants. The association wants restaurants to be allowed to start spending the PPP money when they are allowed to fully reopen, versus the clock starting as soon as they receive the money. Another possibility for restaurants is extending the length of the PPP loan so that it could be used after July 31.

New Mexico, too, is in the throes of speculation, although Gov. Michelle Lujan Grisham said at a news conference on May 13 that restaurants may be allowed to open at limited capacity in early June.

State House Speaker Brian Egolf, D-Santa Fe, tells SFR he thinks the program does not work as well for restaurants and hotels because employees often make more money on unemployment than they do working full time. The $2.2 trillion coronavirus relief law enacted in March also added an extra $600 a week in unemployment benefits through July 31.

"It's not because of a failure in the PPP, it's not because we shouldn't have done the extra money for unemployment," Egolf says. "I think it was just an unintended consequence of provisions in a bill that was, dollar-wise, the largest bill ever passed in the history of Congress, and they did it in a week. We're looking at a way to do a similar program to PPP at the state government level if we get clarification that we can use some of the $1.25 billion from the CARES Act for economic recovery and stimulus."

That's a big "if" for an unknown time in the future. New Mexico legislators are waiting to see what the next federal stimulus packages look like before exploring ways to use state permanent funds for economic development and recovery.

Accessing the general fund at all is off the table, according to Egolf, because there is likely to be a $1.7 to $2.4 billion shortfall in the state budget. More decisions are likely to be made in a special legislative session that's not yet scheduled.

"We've got to see the full range of funding options and that includes potential federal support," the speaker says. "If we do end up with a state-based PPP program, I've said that it needs to give an opportunity to participate first to those businesses that did not have a chance to participate in the federal PPP for whatever reason… And I think we'd need to design it to take into account what we've learned about how it helps or doesn't help restaurants."

For businesses that can continue to operate even during a  pandemic, the PPP loan is more effective. Egolf's law firm received a $248,000 loan from the PPP and has used it to keep 100% benefits coverage and full-time work for its 12 workers. Homewise, which helps buy and sell homes, used its loan of about $1.5 million to keep all of its 97 employees working—albeit from home as much as possible.

"We were able to keep everybody working even though we know our revenue is way down," says Homewise CEO Mike Loftin. The PPP loan "buys you that kind of time and then it gives you time to look at what else we can be doing to improve our situation longer term."

The team at Homewise found other ways to help customers besides buying or selling a home. Interest rates are low right now, so the employees help existing customers get lower mortgage payments. Loftin tells SFR the nonprofit also used the loan to retrain employees to help with refinancing as well as accessing unemployment benefits.

Homewise refinanced 41 homeowners in April, compared to four in a typical month. Loftin isn't too worried—he thinks people will continue to buy and sell their homes.

SFR, which has kept up its print edition and daily web reports amid the shutdowns, obtained a joint PPP loan with its sister paper in Oregon, Willamette Week, last week. The Santa Fe portion of the loan was about  $127,054, and restored partial layoffs for 12 full-time employees in the newsroom, advertising, production and circulation departments, as well as other workers. It also covers rent on the newspaper office on Marcy Street for two months.

Not working for everyone

The federal program appears unable to help businesses owned by noncitizens or permanent residents.

According to John Garcia, New Mexico district director for the US Small Business Administration, business owners applying for PPP must certify they are both a US citizen and have a permanent residence as well as submit their Employer Identification Number (EIN) in the application.

Chevo Serna, owner of the Santa Fe Tree Farm, tells SFR he would like to apply for a PPP loan to keep his employees working full-time during the company's busy season but isn't sure if he can. He is still in the process of getting his U-nonimmigrant status (U-visa), which can take three to five years during non-pandemic times.

The U-visa is for victims of crimes who have suffered mental or physical abuse and are helpful to law enforcement in the investigation or prosecution of a crime.

Serna tells SFR he has an EIN in order to pay taxes and that all of his employees have Social Security numbers. But he still doesn't think he can apply for a loan. For now, he hopes his savings from last year will carry over and that he will have a busy spring and summer.

"I have to use whatever money I saved from the previous year to buy new products and pay my guys to go harvest trees," Serna says. "Social Security, workers comp, I pay all of those things."

Still, Serna might not be able to get a PPP loan, despite being one of many thousands of immigrants who pay upwards of a billion dollars in taxes each year to New Mexico.

Marcela Díaz, executive director of Somos Un Pueblo Unido, a nonprofit that also received a PPP loan for less than $100,000, tells SFR she thinks a lot of immigrant-owned businesses are not getting loans because of a lack of help from banks and information in Spanish.

"A lot of it centers not around eligibility, but around information not getting to them and not having good relationships with local credit unions or their banks," Díaz says.

Loans to the big guys

Meow Wolf, a large Santa Fe corporation with workers in other states, however, got a hand up from the government.

Meow Wolf is not necessarily Shake Shack or the Los Angeles Lakers, which faced public backlash after taking millions of dollars in PPP loans. But Meow Wolf reportedly received $6.6 million from the federal government—and still laid off hundreds of employees anyway.

Leadership at the company knew it would hit a "financial wall" in June—pandemic or none. A presentation from its three CEOs during a meeting on April 13 with employees, audio of which was obtained by SFR, gives a look into Meow Wolf's dire financial situation.

"I think that one of the things we have all learned about this and we've talked about is, the company grew too big too fast," Jim Ward, a chief executive officer at Meow Wolf, said during the meeting.

The CEOs declined an interview for this story. They issued a statement that read in part, "our actions this past month in terms of the depth of our restructuring were, unfortunately, entirely related to the necessity of withstanding the financial impact due to COVID-19."

Entertainment venues are not permitted to reopen under current state orders.

The community banks

Even Meow Wolf's millions are just a slice of the more than $2 billion in federal PPP funds that have come into New Mexico through the program's two rounds.

Jerry Walker, president and CEO of the Independent Community Bankers Association of New Mexico, says most of the money moved out quickly, especially in the first round of funding, because it came through New Mexico's community banks. These locally owned banks can offer more personalized service, as well as financial services in rural areas of the state where national and regional chains won't put a branch.

New Mexico has just 33 community banks. But they were major players in the disbursement of the 8,277 first-round loans.

"I did an internal survey of our community banks here and found that our banks had done over 5,000 of those loans and of that $1.4 billion that was lent during that first round… I could account for about $966 million in loan authorizations for community banks," Walker tells SFR. "We truly are a small business state, not only for retail businesses, but also for banking. And people need to realize and remember that community banks really are just small businesses, too."

Bankers also tell SFR the second round of funding has seen loan amounts plummet—from 30% to 60% lower. Walker thinks it could be because very small businesses are finally able to apply and get approved.

Gary Lutz, regional president of Century Bank, another community institution that served several of the Santa Fe businesses SFR interviewed, says he and his employees have been working overtime to process the "overwhelming" number of applications that have rolled in over the last month.

The bank has processed loan applications and money for about 600 New Mexico businesses so far with $100 million in funding, while preserving about 13,500 jobs, Lutz says.

"How do you funnel the Rio Grande River into a garden hose?" he says. "It's just a matter of… recognizing the most important piece of this is, at the end of every one of these applications is a business owner trying to save their business and trying to help their employees get paid. So that gives us a real strong sense of duty and obligation to do it fast and do it right."

Despite banks seeming to move quickly and efficiently in dumping as much money as possible into New Mexico, the PPP is narrowly focused on a window of time and only for certain needs that do not work well for every business.

In the meantime, while COVID-19 nestles into New Mexicans' lives and the rest of the world, Santa Fe's businesses are getting creative as they look for ways to stay open and make it to the other side.

At Santa Fe Spirits, a distillery and collection of taprooms owned by Colin Keegan, the team has turned to making hand sanitizer where it once made craft vodka. Keegan also applied for and received an $84,000 PPP loan, which he says is equal to two months of payroll.

As businesses prepare to open up and people return to work, Santa Fe Spirits put together a "Welcome Back Pack" complete with disinfectant and hand sanitizer. It also now sells premade cocktails in addition to the company's well known small-batch liquors.

But these are just small steps the company can take to make it through the stay-at-home orders and deepening economic downturn.

While Keegan had to lay off the taproom staff, he still has five employees on site, running curbside deliveries and bottling hand sanitizer.

"We have to spend that money to keep it forgivable so we know we're good 'til the middle of June," Keegan tells SFR in the upstairs office at the distillery. "It came in the middle of March and we started really spending it in April."

The loan gave Keegan breathing space. He hopes his two main streams of income will be up and running again by then—his taprooms and regional distribution. Not only to pay his employees but to pay the other mounting bills for which he can't use the PPP loan.

"We're waiting for some golden nugget to come out of something, which is very nerve racking as a business owner," Keegan says. "The PPP loan gave us some time to breathe and plan, the sanitizers gave us a bit more time… But we can't survive on hand sanitizer."

This story was completed with information from Reveal's reporting networks.