Credit Criteria Used for NMTC Loans
The NMTC program is designed for established businesses with at least a two-to-three year positive track record. NMTC financing is not available to startup firms, nor for working capital / construction loan requests.
Management:
Managers of businesses applying for NMTC financing must have at least two years management experience with the applicant firm, together with at least five years company or industry specific management experience.
Credit:
A positive credit history is required, with no company or personal bankruptcies on record for the previous ten years. At least one of the principals of the firm, who has at least a 20+% ownership interest, must have a credit “score” of 680 or better.
Repayment Ability:
An applicant business will need to evidence an historical cash flow coverage of an average of at least 1.2 to 1.0 for the past three years, and at least 1.0:1.0 for two of the last three years.
RMA Ratios:
The tax returns and recent financial statements for an applicant business must show operating ratios that are higher than comparable NAICS RMA lower quartile ratios for (1) the current ratio; (2) days’ inventory; (3) accounts payable aging; and (4) accounts receivable aging.
Personal Guarantees:
Personal guarantees will be required of all owners with more than a 20% ownership interest in the business and/or property. A corporate guarantee is required from the operating company if the borrower is a LLC or LP.
Borrower / Ownership Structure:
Just because of the way the NMTC program has been created, it is required that a new multi member LLC be formed to own the real estate being financed (or refinanced) using NMTC proceeds. This can significantly simplify NMTC paperwork and eligibility requirements.
