NMTC Loan Program The New Markets Tax Credit (NMTC) loan program is scheduled to receive additional funding soon. We will have further information in the near future. Please stay tuned for updates on when this program will be available again for our small business clients. A 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. ► Eligible Small Businesses To qualify for NMTC financing, a small business applicant needs to be a Qualified Active Low-Income Community Business (QALICB), which, simplistically put, means the majority of the firm’s employees must work at a business location that is located in a low income census tract.  ► Eligible Census Tracts In addition, the project location needs to be in a low-income census tract. The easiest way to check this is to call our office to verify the address. ► Key Benefits of the NMTC Loan Program It is a Loan –To-Value financing program; not a loan-to- cost financing program. The term of the NMTC portion being financed more closely matches the life of the asset being financed. A lower down payment ususally of 10% versus the 25% to 30% typically required for conventional financing, preserves business cash for more urgently needed working capital requirements. Because the NMTC portion is a second mortgage and subordinate to a regular bank loan, risks are minimized to the financial institution, allowing a bank to more competitively position its own market terms and rates on NMTC projects.    ► NMTC Loan Program Interest Rates The initial interest rate to a business borrower  who secures financing under the NMTC program is set at the 7 year Treasury Bond rate plus 290 basis points (= 7 year Treasury + 2.90%). The actual rate will be set, for each loan, on the Tuesday prior to the planned closing.   Because of the source of funds for NMTC loans, the rate will be reset at the 7 year anniversary of the loan’s funding to a rate equivalent to the 10 year Treasury Bond rate plus 325 basis points.   ► Loan Term A NMTC loan is a fully amortizing 25 year term loan.   ► Use of Funds NMTC financing can be used to provide takeout or permanent financing for businesses (including nonprofit businesses) seeking to purchase, construct or rehabilitate buildings primarily.   ► Loan Size The minimum NMTC loan amount is $100,000. The maximum loan amount is currently $1,500,000.   ► Loan Fees A 1.25% origination fee. Loan processing fee of $2,100. Complex transactions will be charged a higher processing fee.   ► Prepayments No partial prepayments are allowed and the prepayment in full of the NMTC loan prior to the seventh year of the loan is strongly discouraged. The actual penalty can be calculated using the following formula:   Upon a full prepayment prior to the seventh anniversary date, a prepayment penalty will be due, calculated as follows: the then current principal balance of the note times initial rate times [(One hundred twenty minus number of months from note date to date of prepayment) divided by twelve] times 0.10.   There is no penalty to prepay on a NMTC loan after year 7 anniversary.   ► Monthly Loan Payments Borrowers must agree to remit monthly loan payments via automatic debits / ACH payments.   ► Collateral A NMTC loan is usually secured by a secondary lien on the real estate being financed, with a first lien being held as security for a bank loan.   ► Occupancy Requirements The operating company involved with an application for NMTC financing, must generally (exceptions are allowed) occupy a minimum of 51% of the real estate collateral involved with the project. The NMTC program is intended to primarily help active small businesses and not necessarily landlords and developers.