A Route 66 motel in Moriarty, New Mexico, received a half-million-dollar loan from an alternative lender that paid for needed renovations and subsequently increased its revenues so much, it is on track to pay off the loan early, according to an article in Albuquerque Business First.
Mike and Debbie Pogue of the Sunset Motel tried for four years to get the money from traditional lenders. Instead, the couple received a $508,000 loan this spring from Accion New Mexico.
“Traditional bankers saw our deal as ‘interesting’ on an emotional level, but not fundable: too old, not a chain, too small, too rural, et cetera. Accion made a huge difference by considering the personal, more emotional aspects of the proposal in order to make the most of their business decision,” he said.
The business loan has allowed the Pogues to finish renovating the motel’s 18 rooms, refurbish outdoor signage and further develop the business’s RV park.
The loan did come with a catch — 7 percent interest and a five-year balloon payment across a 25-year amortization period. A Small Business Administration loan would have cost about 6 percent interest and no balloon payments.
Still, the Pogues say the risk was worth it with record revenue and profits in June; they expect to pay off the loan in its entirety within four years.
“We’re paying a little higher interest rate than we would have with U.S. Bank, which was offering 5 percent [with loan approval]. The thing is, though, is that we’re more than happy to pay a slightly higher interest rate for the increased cash flow it’s provided. We’re also happy to see that [the loan funds] helps someone else get a microloan,” said Mike Pogue.
The Sunset Motel opened in 1954 along Route 66 and was added on several times until 1969. Bill and Elaine Pogue owned the property for many years, until their son, Mike, took over in the mid-1970s.
Accion New Mexico is a nonprofit organization that provides business loans to those who have modest capital, lack of credit history or limited collateral. It operates in New Mexico, Arizona, Texas, Colorado and Nevada.
Our unique approach – called microlending – can trace its roots back more than 40 years with efforts to reduce extreme poverty in Latin America. Microlending now helps small Arizona, Colorado, Nevada, New Mexico and Texas business owners provide for themselves and their families.
Since Accion made that first loan, we have helped small business owners in more than 150 communities, working in some of these states’ most underserved urban neighborhoods and most isolated rural communities.
Grameen Bank of Bangladesh earned the Nobel Peace Prize in 2006 for its microlending that helped bring borrowers out of poverty. Microlenders aren’t charity outfits — they’re out to make money and do so. Microlenders figured out that lending money to long-overlooked business sectors can be profitable. And lenders also figured out what works in third-world countries likely will work in the United States.
Route 66 businesses in the Southwest that are having trouble borrowing money for upgrades may want to consider such an alternate lender.
(Vintage postcard image of the Sunset Motel courtesy of 66Postcards.com)