Whether it’s time to expand to a new market, expand operations or open a new location, most businesses need a loan at some point. Traditional loans work well for many financing needs. But there are other creative financing options – sometimes with more favorable terms – that you should consider for your next project.

There are many ways to finance growth beyond the traditional loan. One of these options that many businesses may not have heard of is New Markets Tax Credit (NMTC). The NMTC program was enacted by Congress in 2000 and allows corporate taxpayers to receive a credit against their federal income taxes for making investments in low-income communities. NMTC financing are loans that provide flexible financing to qualified business and real estate projects.

Jeff Friesen is the president of Enterprise Bank & Trust’s Arizona Region.

The intent of this legislation is to encourage investments that stimulate jobs and other benefits to the people living in the low-income communities that are served. The program incentivizes private investment through a federal tax credit.  This creates the perfect public, private partnership to fill financing gaps traditional lenders aren’t able to provide because of regulatory guidelines.

According to the New Markets Tax Credit Coalition, $720.9 million in NMTC allocation leveraged a total of $1.4 billion in Arizona project investments between 2003 and 2018. A total of 84 businesses and economic revitalization projects in Arizona received NMTC financing, resulting in the creation of 18,000 jobs.

How do I know if a NMTC is right for my business?

It is always wise to look at funding options outside of traditional financing. NMTC is a great example of “patient capital,” meaning the loan can be re-paid slower than a traditional loan. It is a debt solution with flexible features that may include a below-market interest rate, subordinated debt, lower origination fees, longer period of interest only payments, higher loan to value or a longer payback period.

How do I qualify?

To qualify for a NMTC, your project or business must be located in what is called a qualified census tract. Here is one easy-to-use map showing those tracts in the U.S., developed by online data and mapping application, PolicyMap.  

Arizona is one of the states with the highest percentage of qualified census tracts. In fact, 44% of the census tracts in Arizona qualify for NMTC, and 41% of the census tracts in Pinal and Maricopa counties in the Phoenix area qualify for NMTC. Yet, the majority of companies we work with in the Phoenix area are not aware of this program.  

Beyond the physical location, there are other factors that play into the evaluation of your NMTC eligibility. The community impact of your project will also be evaluated such as:

• Ability to create jobs that pay a living wage and offer benefits such as health, dental and vision benefits, retirement plans, vacation, and holiday and sick pay.

• Jobs with training opportunities for advancement or jobs that are accessible to people without a college degree or formal training.

• Goods and services to the people living in the community – food, health services, education, job training, childcare or lodging.

NMTC can help fill gaps in your financing structure on a smaller side as well. For example, if you have a $1 million financing need and a traditional loan will only cover $700,000, a NMTC loan can help you bridge the gap without having to do things like selling equity in your company. These loans can give you a competitive advantage by enabling expansion of your business in ways you may not have been able to do with traditional financing alone.

While there are many benefits to NMTC, there are things to be aware of as you consider this option. Some business types are not eligible, including casinos, liquor stores, golf courses and country clubs.

Companies with substantial cash on hand may not qualify. In addition, NMTC is somewhat complicated during the closing process and you want to arm yourself with partners, like your banking partner, accountant and attorney, who have done this before. 

The more complex the deal, the higher the costs and the easiest way to manage expenses is to have experienced parties involved.


Jeff Friesen is the president of Enterprise Bank & Trust’s Arizona Region. Friesen is responsible for overseeing the fulfillment of current clients’ business and personal banking needs. He leads the Commercial & Industrial and Commercial Real Estate lending groups, as well as, all Tax Credit Finance, including New Market Tax Credit and Historical Tax Credits.