Tax Credits Will Draw Investments for Projects in Low-Income Colorado Communities
Denver, August 4, 2020– Colorado Enterprise Fund (CEF) was selected by the CDFI Fund at the U.S. Department of Treasury to allocate $20 million of New Markets Tax Credits (NMTCs) to banks and other investors as incentives to invest in Colorado’s low-income communities. This award is the first time CEF has received the tax credits to distribute to projects in the state. The organization plans to use its NMTC allocation to attract private-sector investment in manufacturing and industrial projects that create and retain quality jobs, as well as in grocery stores to bring healthy food access to some of Colorado’s most economically distressed areas.
“We are looking forward to connecting investors to projects that benefit both the investor and the businesses in need of financing,” says Ceyl Prinster, President and CEO of CEF. “We can help Colorado make the most of these funds because we’ve been working with Colorado businesses for over 40 years, and we understand the local economies and community needs.”
To help implement its NMTC award, CEF has contracted with United Fund Advisors in Portland, Oregon, a financial advisory firm with extensive experience administering NMTC projects throughout the country, to support CEF with its expertise.
About the New Markets Tax Credit Program
The NMTC Program gives federal income tax credits through certified Community Development Entities (CDEs) like CEF in exchange for investors providing equity to help finance projects with community benefits. The NMTC Program is administered through the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund, established with bipartisan support in 1994, to stimulate economic growth and bring capital investments to communities with severe economic distress and high poverty rates. The program helps to reverse the trend of disinvestment and the cycle of poverty in these areas by bringing jobs, services and needed facilities.
How the Program Benefits Investors and Businesses
As a CDE with authority to distribute NMTC allocations, CEF will offer income tax credits to corporations in exchange for investing in qualified projects benefiting distressed communities. Investors can claim a tax credit worth 39 percent of their equity investment in a NMTC project over a seven-year period.
The NMTC Program expands CEF’s current work with financing small businesses, stimulating Colorado’s economy and enabling businesses to thrive in communities with the greatest needs. CEF will focus its NMTC allocation on manufacturing, industrial and grocery store projects in low-income areas of Colorado. Projects can range from $500,000 to $8 million. NMTCs allow CEF to offer very low, below-market rate loans with extended terms of interest-only and other advantageous features. “As we continue to adapt during these uncertain and ever-changing times, projects have additional challenges to raise the financing needed. These tax credits will spur investment to help move them forward,” said Prinster.
With federal tax credits from the CDFI Fund as a new tool, CEF can build on its work of helping businesses across Colorado access nontraditional financing and support. NMTC loans feature more favorable rates and terms and have more flexibility than those offered in the market. For many of these businesses, a loan like this may be the only financing option available to them. The income generated from NMTC program fees will support CEF’s other direct lending and technical assistance to underserved small businesses in Colorado’s low-income communities.
How the New Markets Tax Credit Program Helps Colorado’s Low-Income Communities
CEF uses its knowledge of local businesses and financing needs to make NMTCs available where they are needed most, focusing on investment in under-resourced communities. NMTC projects will attract needed goods, services and jobs to places that remain under-developed.
Since its inception in 2003, the NMTC Program has spurred $52 billion of investment in low-income communities. It has also supported the construction of 57 million square feet of manufacturing space, 94 million square feet of office space and 67 million square feet of retail space. In addition, as these distressed communities develop, they become even more attractive to investors, creating a virtuous cycle of revitalization.
About Colorado Enterprise Fund
Founded in1976, Colorado Enterprise Fund (CEF) provides loans up to $1 million to finance small businesses and startups unable to obtain funding through traditional banks. CEF has disbursed more than 3,500 loans totaling more than $116 million in startup and growth capital and created or retained over 21,000 jobs in the state. A nonprofit Community Development Financial Institution (CDFI), CEF is based in Denver with lending services available statewide.
CEF makes a positive impact on Colorado’s economy by accelerating community prosperity through its financing and support of entrepreneurs and small businesses across the state.
For more information, visit: www.coloradoenterprisefund.org
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Contact: Kelly Leathers