NMTC Business Financing
A New Markets Tax Credit (NMTC) loan is a viable option on any financing project (even a refinancing one!) involving primarily owner-occupied commercial real estate, with the dual caveats that (a) the business needs to be an “eligible” business and (b) the project property needs to be located in an “eligible” census tract.
We are currently making NMTC loans under round 3 and round 4 of Treasury tax credit allocations. These rounds are more stringent than earlier rounds and so for a business to qualify for NMTC financing, it must meet a special provision And either one economic benchmark OR two geographic benchmarks OR be located in a GO Zone.
Special Provisions
If the borrower is a special purpose entity whose sole purpose is to hold title to the real estate the subject of the application, then a NMTC loan is available only if one of the following four scenarios.
1. Financing costs associated with new construction;
2. Financing costs associated with substantial rehabilitation;
3. Financing costs associated with acquisition and substantial rehabilitation; or,
4. Take our financing associated with new construction, substantial rehabilitation or acquisition and substantial rehabilitation.
If the borrower is not a special purpose entity, it needs to a "qualified" business which involves several tests based on the balance sheet and a requirement that the majority of the firm’s employees must work at a business location that is located in a lower income census tract.
Economic Factors
If one of the following economic factors is present, the project may qualify for NMTC consideration:
* poverty rate > 30%
* median family income < 60%
* unemployment rate at least 1.5x the national average.
Geographic Factors
If one of the economic factors is not present, then the project may qualify if it can meet two or more of the following geographic factors:
- designated redevelopment area by a government agency;
- designated Empowerment Zone, Enterprise Community or Renewal Community;
- Brownfields redevelopment area;
- economic or housing Hot Zone;
- federally designated medically under served (if the business provides health related services)
- state or local tax increment financing districts, enterprise zone programs, or similar;
- high migration rural counties.
"Go Zone" Factors
If neither an economic factor nor two or more geographic factors are present, the project may qualify for NMTC financing if it is in a Go Zone. A Go Zone is a county for which FEMA has (a) issued a major disaster declaration since July 15 2005 and (b) has made a determination that the county is eligible for both "individual and public assistance".
An easy way to check some of the above information is to visit www.QSGconsulting.net and enter a street address and zip code for an immediate “eligible” or “ineligible” NMTC reading. But to make sure, please call the Colorado Lending Source hotline (303-657-0010) and ask for either Karen or Nicole. We will help identify whether or not a project is potentially eligible, and we will do this quite quickly and reasonably expeditiously.
