Transcript Role of CDFIs in bringing capital to new and growing

Adaptive reuse
Logging
Energy
Agriculture
Natural Capital Investment Fund
Advancing Sustainable Economic Development
About Natural Capital
Investment Fund
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Founded in 2001 by The
Conservation Fund
$15 Million Loan Fund
Certified Community Development
Financial Institution (CDFI)
Lends to small businesses,
nonprofits, and local governments
Focuses on projects that support:
– Environmental stewardship
– Job creation
– Economic growth
Serving Appalachia and Beyond
Not Quite Traditional Financing
Flexible Funds
Our diverse sources of capital
provide flexible non-federal
funds to blend with
other Revolving Loan
Funds (RLFs) and
lenders.
Funding Options
• Up to $500,000 in house
• Up to $2.5MM with guaranteed loan
• ShadeFund microloans
• USDA guaranteed loans
• Market rate, based on risk (4-7%)
• Terms depend on use, up to 15 years for real estate
• Senior and subordinated debt
Energy Initiative
Find: Educate small business
owners on the benefits of EE
Facilitate:
– Subsidize energy audits;
– identify & coordinate
resources
Fund: Provide financing &
technical assistance
Feedback: Track energy &
cost savings
USDA Rural Energy for America
Program
(REAP)
• Small, rural businesses OR agricultural producer
• 25% cost-share (for eligible project costs)
• Maximum awards
– Energy efficiency: $250,000
– Renewable energy: $500,000
• Simplified applications for projects < $200K
Funds to Leverage
• USDA REAP & B&I Guaranteed Loan Programs
• Community Reinvestment Act loans
• Economic Development Authority loans
• Historic Rehabilitation Tax Credit
• Energy Investment Tax Credit (solar)
New Markets Tax Credits
• 39% credit for qualifying equity investments
• 7 year compliance period/payback period
• Eligibility by census tract
– High Out-Migration Rural County Census Tracts
– Low-Population /Empowerment Zone (EZ) Census Tracts
– Targeted Populations
• Below market interest rate and/or equity features
• Partial-full principal forgiveness
Simple $1MM Example
• CDFI Fund awards a tax credit allocation of $1MM to a CDE
• The CDE offers the tax credit to a single investor in exchange
for a $1MM equity investment
– Generates a $50,000 credit/yr for the first three years
– Generates a $60,000 credit/yr for the final four years
• Total credit value over 7 years is $390,000
Unleveraged Structure
Leveraged Structure (typical)
NMTC Eligible Areas
NMTC Eligible Projects/Impacts
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New construction or substantial rehab
Commercial or mixed-use development
Brownfield sites
Food Deserts
Low-rent areas
Job creation/retention
Health care
Educational benefits
Local support
Shovel ready
Funding gaps
Advantages & Challenges/Risks
Pros
Cons
• “But for” projects are
completed
• Focus on creating
substantial community
benefits
• Efficient use of taxpayer
dollars
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Limited access to credits
Strict compliance issues
Demand far exceeds supply
Complex & costly
transaction structures
• Recapture risk not prorated
• Renewal of program
Sponsor Role
• Determine eligibility
• Articulate community impact
• Specify level of commitment of all funding sources
• Develop pro-forma that articulates need
• Begin conversation with NMTC allocatees/CDEs
Get In Touch
Visit us on the web:
ncifund.org
Contact me:
Hannah Vargason
304-870-2238
[email protected]