Rural Development Partners is a Community Development Entity (CDE) with a nationwide service area. We utilize the New Market Tax Credit (NMTC) program to help organizations relocate and expand operations in distressed rural communities. RDP investments create catalytic impact through job creation, economic growth that induces additional private capital investment, workforce training opportunities, and increased food access for Rural America. We partner with organizations who take-action to invest and support their local communities.
RDP is eligible to apply for an annual allocation of Federal New Market Tax Credits (NMTC) awarded by the CDFI. Our reputation and demonstration of good stewardship has won twelve NMTC awards from the US Treasury totaling $751.7 since 2004. We work to combine NMTCs with bank loans and tax credit investors to create a more favorable financing solution than what is available through conventional lending and investing. We have used NMTC financing to help 50 businesses and organizations across the nation complete projects that provide access to quality jobs and healthy food. View our Impact
Is your organization considering expansion in a rural community seeking to grow and provide opportunities for your citizens? This RDP Lead Guide will highlight the program qualifications RDP prioritizes.
· RDP’s Community Investment Program funds local workforce development initiatives to help low-income persons access the quality jobs NMTCs bring to our communities.
According to the CDFI Fund, from the years 2000 to 2022, every $1 invested in the NMTC Program by the Federal government has generated over $8 of private investment. See the CDFI’s 2023 NMTC Program Fact Sheet to learn how businesses and communities benefit from the Program.
To learn how NMTC financing with RDP, see our Blog.
Project Structure: The most common NMTC transition is referred to as a Leveraged Transaction. Below is an example of a Leveraged Structure.
The above diagram represents a project with Total Project Costs of $10MM in allocation. This would provide approximately $3.3MM in equity toward Total Project Costs. Since the tax credit investor provides equity equal to 39% of the allocation at a discounted credit price (discounted rates typically fall within 70-90% per dollar of NMTC benefit), the Leverage Lender (LL) in this scenario would bring the additional $6.7MM needed to cover the total project costs. Typically, the LL would be the actual sponsor of the QALICB. The Sponsor’s leverage loan funds typically come from either bank debt, grants, or true company equity.
The tax credit investor will then create what is called an investment fund, which will take a membership interest in the CDE. Once the investment fund is created, the LL will make its loan and the tax credit investor will make its equity contribution into the investment fund, which is then passed down to the CDE.
Once the Qualified Equity Investment (QEI) passes to the CDE, the CDE will create what is referred to as an A Loan and a B Loan. The A Loan will match the amount provided by the LL (in this case $6.7MM). The B Loan will match the equity coming in from the tax credit investor (in this case $3.3MM). The A and B Loans require that the QALICB makes interest only payments during the 7-year compliance period, which is the timeframe that the tax credits are claimed by the tax credit investor. These interest payments flow back up the chain to the investment fund and to the LL and tax credit investor. After the 7-year compliance period is complete the A Loan is typically re-financed or paid in full by the QALICB. The B loan at the end of the 7-years is forgiven, as the tax credits will have been fully claimed by the tax credit investor.