New Markets Tax Credits (NMTCs) are a flexible financing tool, primarily used for commercial, industrial or nonprofit-sponsored development projects in low-income communities. NMTCs are also used to finance for operating businesses. The NMTC portion of a project financing is typically 20 to 30 percent of total project costs.
The New Markets Tax Credit program revitalizes low-income and distressed communities—both urban and rural— by encouraging private investment and economic growth through access to capital that they otherwise would not have. Ballard Consulting has been active in NMTC Programs in several regions (primarily in Nevada, North Dakota and Utah) and can serve clients anywhere in the U.S.
Ballard Consulting provides a range of NMTC-related services on behalf of manufacturers, distribution companies, health care organizations, charter and private schools, nonprofit organizations, and real estate developers.
Ballard Consulting assists project sponsors (the borrowers) in pursuing NMTC financing in the highly competitive national or state marketplace. Our track record of structuring transactions for optimal execution allow us to position our clients’ projects as effectively as possible to obtain financing.
Some of the projects we have financed or are working on are:
- Las Vegas-based telecommunications company: $2 million low-interest loan, forgivable after seven years. Financing was used to acquire facilities, acquire a competitor and provide working capital.
- Dental practice with seven offices in Las Vegas, North Las Vegas and Henderson: $2 million in low-interest financing the acquisition or creation of four similar practices with two in low income communities, one in Summerlin and one in Green Valley.
- Salt Lake City-based facility services company: $1.45 million in financing to acquire facilities, refinance some existing debt and provide additional working capital.
- Henderson-based private school: $7.5 million in financing campus expansion and refinancing of existing debt
- North Dakota-based developer: $23 million mixed-use development with a $14 million primary loan and a NMTC forgivable loan of $6.5 million.
- Clark County-based manufacturing company: $4.5 in financing to buy land, build building, refinance existing debt, working capital.
- Growing Orem, Utah-based software services company secured $1.5 million small business loan.
We have prepared answers to Frequently Asked Questions for reference:
What kind of projects qualify for a NMTC?
The regulations are very broad as to what type of projects would qualify. For example the projects can be such things as a human services organization, or a business such as a shopping center, hotel, manufacturing facility, office space, a school, childcare facility, health care facility, etc, etc. It helps to keep in mind that the basic concept of the NMTC program is to encourage developers to build infrastructure in low income communities.
There are a few types of businesses that do not qualify: golf courses, country clubs, massage parlors, hot tub or sun tanning facilities, casinos, race tracks or other gambling facilities, or any store whose principle purpose is the sale of alcoholic beverages for consumption off premises.
How does a project qualify for a NMTC transaction?
To qualify for a NMTC, a project or not-for-profit agency must be (a) operated in a low income community (LIC), or (b) it must qualify with respect to a targeted population.
Why would an agency use a consultant to complete an NMTC transaction?
A NMTC transaction is extremely complex – in terms of navigating the process of getting ready for a transaction, obtaining an allocation and managing the actual legal, banking and accounting aspects of completing a transaction. Also, the process of obtaining an allocation and finding investors is extremely competitive and requires special knowledge, contacts and skills that a consultant will provide. In addition, a consultant will generally maximize the financial benefit of a transaction.
Completing a transaction can also be extremely time-consuming to an agency’s executive management and board of directors — and a consultant will minimize the time and energy spent in understanding and navigating a NMTC transaction. By using a consultant, the agency can attend to day-to-day operations, as well as focus on managing the capital campaign that is generally associated with a capital project.
Why would an agency use Ballard Consulting to complete an NMTC transaction?
Over the past two years, Ballard Consulting has build a significant knowledge base and network with investors, allocatees and legal and accounting firms that focus on NMTC transactions. Ballard Consulting is particularly adept in working with entrepreneurs and not-for-profits, enabling Ballard Consulting to explain and guide them through a transaction from beginning to end — as well as providing follow-on services after a transaction is completed. Most importantly, Ballard Consulting has been able to bring significant financial benefits — on average bringing cash equal to 30 percent of the cost of a capital project.