WASHINGTON -- The Small Business Administration has launched a pilot program to provide financial assistance to small businesses in economically distressed urban and rural areas, or "New Markets," that need the economic attention to get communities back on their feet.
The New Markets Lending Initiative aims to help small businesses by enabling Community Development Entities to combine the benefits of both the New Markets Tax Credit Program and SBA-guaranteed loans to provide inner city and rural small business owners and entrepreneurs' greater access to financing and business training. The initiative also provides incentives for commercial lenders and local development organizations to make more SBA-guaranteed loans in these communities.
The SBA pilot program, which is only available to 7(a) lenders making new loans through advance-purchase commitments with CDEs, waives a regulation that limits an SBA lender's ability to sell any portion of an SBA guaranteed loan to anyone other than another SBA lender. The waiver allows CDEs with New Markets Tax Credit allocations to purchase up to 90% of SBAExpress or CommunityExpress 7(a) loans up to $150,000 made to NMTC "qualified" businesses in low-income communities. These new loans are guaranteed by the SBA. Administered by the Treasury Department's Community Development Financial Institutions Fund, the New Markets Tax Credit Program permits investors to receive credits on their federal taxes of up to 39% of investments made in CDEs. Under the program, CommunityExpress lenders will assist CDEs to provide small business borrowers with a package of services including mentoring, coaching and counseling.
The New Markets Tax Credit Program is expected to spur approximately $16 billion in investments into CDE investment institutions, according to SBA. The program was created by Congress through the Community Renewal Tax Relief Act of 2000.