NEW MARKETS TAX CREDIT: For Borrowers

The New Markets Tax Credit (NMTC) program was passed by the US Congress as part of the Community Renewal Tax Relief Act of 2000. The US Department of the Treasury awarded Community Development Entities (CDEs) tax credits. The CDEs attract investors with the tax credits, and then loan out the funds at below market interest rates to businesses in low-income communities.

Who Is Running The Program?
Kitsap County NMTC Facilitators I, LLC (the CDE) is a CDE that has been awarded $40 million worth of tax credits to be used in real estate projects. The CDE is a wholly owned subsidiary of the Kitsap County Consolidated Housing Authority.

Why Should You Participate?
The NMTC Program is a tremendous opportunity for businesses who would otherwise not qualify for loans through conventional financing. In hopes of encouraging more business development in downtown Bremerton, the CDE will underwrite loans using more flexible credit criteria and better rates and terms. Businesses looking to relocate in low income communities within the city of Bremerton are eligible for loans that are 1.5% to 3% below market rates.

What Kind Of Loan Is It?
The proceeds of the loan can only be used for real estate construction or rehabilitation. The loan will be a 7 year bullet loan with interest only payments. Absolutely no principal payments will be accepted during the 7 years of the loan. At the end of the 7 years, the business can refinance the loan. The borrower will have to maintain a loan loss reserve equal to 4% of the loan during the 7 years.

Program Rules
To qualify for a NMTC loan, the business will have to follow some Community Development Financial Institutions (CDFI) Fund rules.

• The desired location of the business will have to be within the following low-income census tracts of Bremerton: 805.00, 812.00, 810.00, 801.02, 802.00, 803.00, 806.00, and 811.00.
   
• The business and its tenants can not be a commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises. Farming is also not allowed.
   
• The borrower needs to be a Qualified Active Low-Income Community Business (QALICB). QALICBs need to have:
   
  
  • At least 50% of total gross income derived from the low-income community
  • At least 40% of the use of the tangible property must be in the low-income community
  • At least 40% of the services performed for the entity by its employees are in the low-income community
  • No more than 5% collectibles (i.e. antiques)
  • No more than 5% financial property

Kitsap County NMTC Facilitators I, LLC is very excited about this program. We encourage you to call us to discuss the program or to ask any questions you may have. You may also email us by clicking Here.

Chuck Depew, Consultant, 206.419.3904 

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