NMFA details expanded childcare loan program: 20‑year loans, 2% interest and performance‑based abatement

The New Mexico Finance Authority told its Oversight Committee it has retooled a long‑dormant childcare facility revolving fund to expand rural child‑care capacity and help providers build or renovate centers.

Marquita Russell, chief executive officer of the New Mexico Finance Authority, said the statute creating the program had produced one small loan years ago and then sat unused until recent legislative changes and a new partnership with the Early Childhood Education and Care Department (ECCECD) revived it.

John Brooks, a long‑time NMFA staff member who walked the committee through program terms, said the legislature added $10,000,000 to the fund (with earlier appropriations and NMFA contributions bringing the program near $13,000,000). The retooled program will offer term loans between $100,000 and $2,500,000, extend maximum amortizations to 20 years and allow a two‑year interest‑only period intended to cover construction or early working capital.

"The interest rate is at 2%," Brooks said, noting NMFA lowered the rate from 3% to reduce the cost burden for small providers. "This is a true business loan," Marquita Russell added, saying applicants must still meet standard underwriting, management and staffing requirements.

Borrowers will generally need to provide up to 10% equity (cash or in‑kind such as land or equipment) and collateral; nonprofits may avoid personal guarantees where appropriate. The program is intended to be flexible in the capital stack: NMFA may subordinate to federally insured banks and partner with community development financial institutions or other lenders to close financing gaps.

A key incentive in the revised program is a contract‑for‑services feature implemented in coordination with ECECD. If a provider meets statutory performance requirements — serving nontraditional hours, demonstrating at least 50% of children receive ECECD‑assistance, and increasing served children by 10% — NMFA will abate principal equal to 25% of the project cost and may add up to an additional 10% abatement when at least half of expansion slots are for infants and toddlers. Brooks said the maximum abatement figure discussed in the presentation was approximately $750,000.

Representative Locke pressed NMFA staff on whether the $10,000,000 appropriation would significantly change statewide capacity given the existence of a larger early childhood trust fund. NMFA staff replied the loan program aims to create supply — bricks‑and‑mortar centers and expansion projects — that reimbursement dollars alone do not produce.

NMFA said ECECD will manage applicant prioritization and eligibility determinations; once an applicant is prioritized, NMFA conducts underwriting, closes the loan and administers disbursements. Program metrics and impact goals such as slots added, geographic distribution and project completions will be set and tracked by ECECD and reported through NMFA to the Oversight Committee.

NMFA also described application processes and technical assistance: the loan application will be available initially on NMFA’s site and on ECECD’s portal while NMFA builds a stable housing location on ECECD’s site; NMFA staff and ECCD will provide technical assistance to applicants, and NMFA said it will work to address language‑access needs for Spanish and other languages.

No formal committee action was taken at the meeting. NMFA said finalized underwriting materials will be taken to the NMFA board for approval and the Oversight Committee will receive implementation reports going forward.

What’s next: NMFA will finalize applications, continue outreach and begin underwriting once prioritized applications arrive; ECECD will set impact targets that NMFA will track in loan administration and reporting to the Oversight Committee.