Starting a Business in New Mexico

A new business in New Mexico is not out of reach. So have you been wondering: how do I start a business in New Mexico? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in New Mexico during a recession?

New Business in New Mexico: Advantages and Disadvantages

Business Insider puts New Mexico in its middle ten states for starting a new business, according to a 2016 article. And this is for the whole country. Startup activity in New Mexico is just average.

But the state boasts a lower than average cost of living. Still, New Mexico has a per capita GDP about $7,000 below the national average. Also, there is a wide availability of possible employees in the state.

Recent Declines

The more recent news is not so good. In 2018, Forbes ranked New Mexico at number 45. Also in 2018, Fit Small Business clocked in New Mexico at number 48.  Keep in mind, all three sites have differing methodologies.

So, what gives?

Forbes says New Mexico growth prospects and business costs are average. The regulatory environment is worse than average. And the labor supply, economic climate, and quality of life are all in the bottom ten. Quality of life was the second-worst for the entire country.

Ouch.

Fit Small Business praises New Mexico for a good cost of living. But the following are all worse than average: taxes, access to capital, and costs of starting a business. The following three metrics are all in the bottom ten: quality of life, startup activity, and labor market. The labor market was the absolute worst in the nation. Labor market is a measure of the desirability of an area and the number of people with bachelor’s degrees.

Double ouch.

So, is it worth it to start a business in New Mexico? Only you can decide this. Does the decent cost of living outweigh an abysmal labor market and quality of life?

Start a New Business in New Mexico – New Mexico Top Industries

According to New Mexico Tourism, the biggest industries in New Mexico are mining for coal, potash, uranium, copper, and silver.

More top industries are oil and natural gas production; and tourism. As in most states, health care and social assistance are also large employment sectors.

New Mexico Business Ideas

Smart business owners can find new opportunities. Work with the bigger industries in the state. Offer goods or services such as food service, transportation, and hospitality. Another idea is trucking for any industry. More ideas are also developing and producing safety equipment.

Here is how to start a new business in New Mexico.

Start a New Business in New Mexico – New Mexico New Business Secretary of State Requirements

Register a Business Name

Perform a business name search on the New Mexico Secretary of State’s website.

Corporations

A corporation needs a unique name.

Before filing to incorporate, search online databases and other records. See if the name is already in use. Search a database of corporations registered in New Mexico at the official New Mexico government website.

Corporate Name Reservations

It is not necessary to reserve a name before a business owner files Articles of Incorporation in New Mexico. But if a business owner does not plan to file Articles of Incorporation right away, they can submit a name reservation application to the office of the New Mexico Secretary of State.

The name reservation application form is at Reserve a New Mexico Corporation Name on the State of New Mexico website. There is a fee of $25.00 to reserve a name. The name will then be reserved for a period of 120 days.

The name that a business owner uses to incorporate their small business in the state of New Mexico must include the word “corporation,” “incorporated,” or “limited.” Or it can also be an abbreviation of one of these words.

Registered Agents

A corporation will also need to choose a registered agent that they indicate on the Articles of Incorporation. A registered agent will act as an agent for service of process. They will receive legal and tax documents on behalf of the corporation.

An adult resident of New Mexico or a corporation can act as a registered agent. But a corporation can’t act as its own registered agent.

Business Permits and Licenses

So check with the New Mexico Regulation and Licensing Department.

Local Permits and Licenses

Go to the New Mexico Secretary of State for all contact information for county clerks.

Start a New Business in New Mexico – Business Registration

Use the menu on the left of the Corporations page on the Secretary of State website to find the required forms.

Tax Registration

Go to the New Mexico Taxation and Revenue Department to register.

Start a New Business in New Mexico – Virtual Offices

Alliance offers New Mexico virtual business office space in Albuquerque only.

Therefore, go to Regus for Las Cruces and Santa Fe. Also, use DaVinci for Los Alamos.

But for Farmington and other parts of the state, try area business owners. Or ask computer user groups for help.

More options are virtual business office space in nearby states. These are Arizona, Colorado, Kansas, Oklahoma, Texas, and also Utah.

Start a New Business in New Mexico – Establish Business Credit

Business credit is credit in a company’s name. It doesn’t attach to a business owner’s individual credit, not even when the owner is a sole proprietor and the only employee of the company.

Thus, a business owner’s business and personal credit scores can be very different.

The Benefits

Because small business credit is separate from personal, it helps to safeguard a small business owner’s personal assets, in the event of litigation or business insolvency.

Also, with two separate credit scores, an entrepreneur can get two separate cards from the same vendor. This effectively doubles purchasing power.

Another benefit is that even new ventures can do this. Heading to a bank for a business loan can be a formula for disappointment. But building small business credit, when done correctly, is a plan for success.

Personal credit scores depend upon payments but also additional considerations like credit usage percentages.

But for small business credit, the scores really only depend on whether a business pays its debts on time.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Growing business credit is a process, and it does not occur without effort. A company will need to proactively work to develop company credit.

Nonetheless, it can be done readily and quickly, and it is much faster than building consumer credit scores.

Merchants are a big component of this process.

Doing the steps out of order will result in repetitive rejections. Nobody can start at the top with business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Start a New Business in New Mexico – Business Fundability

A business must be fundable to lenders and vendors.

That is why, a company will need a professional-looking website and e-mail address. And it needs to have website hosting bought from a company like GoDaddy.

And also, business telephone and fax numbers ought to have a listing on ListYourself.net.

Likewise, the business phone number should be toll-free (800 exchange or similar).

A small business will also need a bank account dedicated solely to it, and it has to have every one of the licenses necessary for running.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Working with the Internal Revenue Service

Visit the Internal Revenue Service website and get an EIN for the business. They’re free of charge. Select a business entity like corporation, LLC, etc.

A company can begin as a sole proprietor. But they will most likely wish to change to a form of corporation or an LLC.

This is in order to reduce risk. And it will maximize tax benefits.

A business entity will matter when it concerns tax obligations and liability in case of a lawsuit. A sole proprietorship means the owner is it when it comes to liability and tax obligations. Nobody else is responsible.

Sole Proprietors Take Note

If you operate a business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the company name. Hence, you can end up being personally liable for all small business financial obligations.

In addition, per the IRS, using this structure there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 possibility for corporations! Prevent confusion and drastically lower the odds of an Internal Revenue Service audit simultaneously.

Instigating the Business Credit Reporting Process

Start at the D&B website and obtain a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a business into their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s web sites for the company. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

In this way, Experian and Equifax will have something to report on.

Vendor Credit Tier

First you ought to establish trade lines that report. This is also referred to as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin to acquire credit in the retail and cash credit tiers.

These kinds of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But to start with, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are oftentimes Net 30, rather than revolving.

So, if you get approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts must be paid in full within 30 days. 60 accounts need to be paid fully within 60 days. Compared to with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you used.

To start your business credit profile the proper way, you need to get approval for vendor accounts that report to the business credit reporting bureaus. As soon as that’s done, you can then use the credit.

Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Helps

Not every vendor can help in the same way true starter credit can. These are vendors that will grant an approval with a minimum of effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than once to these vendors. So, this is to verify you are trustworthy and will pay punctually.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are businesses like Office Depot and Staples.

Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.

One example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or more.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are companies like BP and Conoco. Use this credit to purchase fuel, and to fix, and take care of vehicles. Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or better and a 411 company phone listing.

Shell may claim they want a specific amount of time in business or revenue. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been responsibly managing the credit you’ve up to this point? Then progress to the cash credit tier. These are companies like Visa and MasterCard. Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or more. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Additionally, they want you to have an established small business.

These are companies like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are normally MasterCard credit cards. If you have 14 trade accounts reporting, then these are feasible.

Start a New Business in New Mexico – Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and fix any mistakes ASAP. Get in the practice of taking a look at credit reports and digging into the particulars, and not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: fastcs.wpengine.com/monitoring.

Update Your Records

Update the data if there are inaccuracies or the details is incomplete.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to challenge any inaccuracies in your records. Errors in your credit report(s) can be taken care of. But the CRAs generally want you to dispute in a particular way.

Disputes

Disputing credit report mistakes usually means you mail a paper letter with duplicates of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always send copies and keep the originals.

Fixing credit report mistakes also means you specifically spell out any charges you dispute. Make your dispute letter as understandable as possible. Be specific about the issues with your report. Use certified mail so that you will have proof that you sent in your dispute.

Start a New Business in New Mexico – A Word about Building Business Credit

Always use credit responsibly! Never borrow more than what you can pay off. Keep an eye on balances and deadlines for payments. Paying on time and fully will do more to elevate business credit scores than just about anything else.

Establishing company credit pays off. Great business credit scores help a business get loans. Your lending institution knows the business can pay its debts. They understand the business is bona fide.

The small business’s EIN links to high scores and lenders won’t feel the need to demand a personal guarantee.

Business credit is an asset which can help your company for years to come.

Learn more here and get started toward opening a new business in New Mexico.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

New Mexico’s Response to COVID-19

Here’s what New Mexico is doing about COVID-19. On March 11, Governor Michelle Lujon Grisham declared a state of emergency. New Mexico has qualified for the SBA Disaster Loan Assistance program to assist businesses negatively impacted by the COVID-19 public health emergency.

This includes low-interest federal disaster loans up to $2 million for working capital to small businesses and non-profit organizations suffering substantial economic injury as a result of COVID-19. 

See: governor.state.nm.us/2020/03/11/updated-governor-department-of-health-announce-first-positive-covid-19-cases-in-new-mexico 

And see newmexico.gov/2020/03/17/state-secures-sba-disaster-loan-assistance-for-businesses-affected-by-covid-19