About New Markets Tax Credits

The New Markets Tax Credit (NMTC) can provide millions of dollars in economic development funds on Indian Reservations. Money generated from the NMTC program can be used to build medical clinics, manufacturing facilities, retail stores and businesses. Travois New Markets can help you navigate this program to expand economic opportunities on your reservation.

In 2007, Travois New Markets was awarded a $30 million allocation of NMTCs, which it has invested in three qualified projects, and in 2009, Travois New Markets was awarded an $80 million allocation, which it will dedicate exclusively to Indian Country projects.

Signed into law in 2000, the NMTC is doing for economic development what the LIHTC has done for affordable housing development. Operating on the same basic principle as that of the LIHTC, the NMTC can attract equity to close the financing gaps that keep many Indian Country business deals and community economic development projects from getting off the ground.

In order to receive the credit, investors must make equity investments in Community Development Entities (CDEs) like Travois New Markets. CDEs serve a range of markets: urban and rural towns across the country. Travois New Markets is dedicated exclusively to serving Indian Country. An allocation of NMTCs allows a CDE to receive equity investments from NMTC investors. CDEs use that equity to arrange financing for qualified active low-income community businesses (QALICBs). The QALICB must operate in a low-income community and have a substantial connection to that community.

CDEs take several forms – community development financial institutions, small business investment companies and venture capital firms, for example. The Community Development Financial Institutions Fund (CDFI Fund) certifies CDEs and determines their allocations of NMTCs. Travois New Markets decides independently whether to fund a project. Organizations receive funding from us directly.

This is a crucial difference from the LIHTC program – allocations of credits are made to CDEs that identify projects and finance new or existing businesses, whereas LIHTC allocations are made by state allocating agencies to specific projects.

With NMTCs, CDEs can support businesses and organizations that the mainstream market fails to serve. These businesses offer jobs in low-income communities and can spark additional economic development. NMTCs cannot be used to finance the following: gaming facilities, liquor stores, golf courses, pure farming businesses and pure residential businesses.

NMTCs can make the difference in the life of a business that is running into obstacles in the mainstream lending marketplace. These credits cannot save failing enterprises or make an unsound business succeed. They can, however, close financing gaps and remove the obstacles that keep solid business plans from becoming a reality.

Travois New Markets will provide low-interest subordinated loans to Native American businesses that export goods and services to off-reservation markets or meet local needs. This will strengthen the economies within our service area—America’s Indian reservations and Tribal lands—leading to increased self-determination. Support of self-determination is mirrored in our lending structure which incorporates tribal funds or tribally controlled soft debt. Leveraging such funds will decrease the size of our market-rate senior loans and give our Tribal partners the maximum control possible over the leveraged structure. The inclusion of tribal soft-debt funds, as well as New Markets Tax Credit (NMTC) equity, will ensure our subordinated loans keep overall interest rates as low as possible on every transaction.