Benefits of New Markets Tax Credit Program Subsidy
Our discussion applies to both types of NMTC Program subsidies (such as legal requirements and underwriting criteria), except that we will also discuss the basic forgivable loan NMTC structure and the unwind of the NMTC financing at the end of the 7-year NMTC compliance period.
The smaller NMTC Program subsidy (i.e., the non-forgivable loan) (a) has nontraditional terms and flexible underwriting criteria that are similar to those of the forgivable loan (except that it is not forgiven); and (b) is subject to the same legal and underwriting requirements of the forgivable loan.
Good Borrower and Project Candidates for NMTC Program Subsidy
NMTC Program Subsidy Facilitated by “Allocatees” and “CDEs
How NMTC Transaction Participants Benefit
- the borrower:
- receives a forgivable loan equal to the gap in available financing; and
- such loan is forgiven at the end of the 7-year NMTC compliance period; and
- the Allocatee:
- receives fees for facilitating the NMTC financing; and
- has no capital at risk (because the QEI proceeds (rather than its own funds) are used to make the 2 loans to the borrower).
NMTC financing can be combined with state NMTCs, historic tax credit financing, and other community and economic development programs (such as opportunity zone financing, and those provided by the USDA Programs and the CDFI Programs). However, NMTC financing cannot finance any square feet to the extent that low-income housing tax credits finance such square feet.
Although the typical NMTC financing structure is quite complex based on all of the sources of funds, the fundamental initial structure of any NMTC financing is illustrated in the following links:
For a more detailed discussion of the benefits of NMTC financing to a borrower, and applicable legal requirements and underwriting requirements, please click on the following link:
Please click the following link to watch our pre-recorded webinar:
To apply as a borrower for NMTC financing, please click on the following link:
For a more detailed discussion of the benefits of participating as a CDE in NMTC financing, and applicable legal requirements and underwriting requirements, please click on the following link:
To apply as a CDE for a NMTC Allocation Award, please click the following link: