Learning how to apply for New Market Tax Credits effectively can mean the difference between securing transformative financing and missing opportunities. The New Markets Tax Credit (NMTC) program offers substantial benefits, including 39 percent tax credits to investors and affordable capital to businesses. Still, the application process demands strategic planning and meticulous preparation. This guide provides actionable strategies for applying for new market tax credits effectively across the United States.
Step One: Conduct Thorough Self-Assessment
Begin with an honest self-assessment before approaching any Community Development Entity (CDE). Verify location eligibility using the CDFI Fund’s official NMTC Mapping Tool to confirm whether your project falls within a qualifying low-income census tract. If the primary location doesn’t qualify, explore whether the targeted population provision might create eligibility.
Evaluate your business type against prohibited activities (golf courses, country clubs, massage parlors, hot tub facilities, suntan facilities, racetracks, gambling facilities, and stores principally selling alcohol). Assess financial readiness by reviewing three years of financial statements and tax returns. Most transactions involve $2 million to $5 million or more in NMTC allocation.
Step Two: Research and Identify Target CDEs
Strategic CDE selection is critical. Focus on geographic alignment—many CDEs concentrate investments in specific states or regions. Identify CDEs that actively invest in your project location by reviewing the New Markets Tax Credit Coalition directory and consulting state economic development agencies.
Evaluate sector specialization. Match your project type with CDEs that have relevant expertise. Assess allocation availability—CDEs must have undeployed allocation authority to make new investments. Create a target list of five to ten CDEs that appear well-matched to your project characteristics.
Step Three: Prepare a Compelling Executive Summary
Create a two to four-page executive summary that captures CDE’s attention. Open with a clear project description, including what your business does, where it operates, and why NMTC financing is sought. Emphasize location in qualifying census tracts, stating the census tract number and qualification criteria.
Quantify job creation potential clearly—specify full-time equivalent jobs created during construction and operations, wage levels, and commitments to hire from low-income communities. Describe community impact beyond job creation, explaining how your project addresses unmet needs or provides essential services. Present financial highlights including total project costs, requested NMTC allocation, and key financial metrics. Introduce your management team emphasizing relevant experience.
Step Four: Make Professional Initial Contact and Respond Promptly
Submit executive summaries through channels specified by CDEs. Include a professional cover letter introducing your organization and explaining why you selected this particular CDE. Personalized letters that reference the CDE’s mission demonstrate genuine interest. Follow up appropriately without being pushy—CDEs typically respond within two to four weeks.
Once CDEs express interest, responsiveness becomes critical. Organize documentation systematically before applications begin. Create digital folders containing financial statements, tax returns, business plans, and organizational documents. Assign a dedicated point person for managing the application process. Provide complete responses to requests rather than partial information, and acknowledge requests immediately with realistic timelines.
Step Five: Develop Financial Projections and Community Impact Narratives
Strong financial projections must demonstrate that businesses can service NMTC financing throughout the seven-year compliance period—base projections on realistic assumptions supported by historical performance and industry benchmarks. Detail assumptions underlying all projections and conduct sensitivity analysis showing how different scenarios affect financial performance. Demonstrate adequate cash flow to service all debt. Working with experienced NMTC advisory services helps develop credible projections.
Compelling community impact narratives resonate with CDE missions. Quantify impacts using specific numbers—state that your project will create 47 full-time jobs rather than “numerous” jobs. Connect impacts to documented community needs using census data or community health assessments. Include letters of support from community organizations and elected officials. Review successful NMTC projects to understand how compelling impact narratives are structured.
Step Six: Engage Professional Advisors
NMTC consultants who specialize in structuring transactions and managing application processes provide valuable services, particularly for first-time applicants. Legal counsel experienced in NMTC transactions becomes essential once applications progress toward term sheets and closings. Accountants and financial advisors help prepare projections and organize financial documentation.
Starting Your NMTC Application
Understanding how to apply for New Market Tax Credits effectively requires systematic preparation, strategic CDE selection, compelling presentation of project merits, and persistent execution throughout the application process. By following these steps— from thorough self-assessment to professional advisor engagement — businesses position themselves to access this transformative financing tool that can make projects feasible while revitalizing underserved communities.
Ready to begin your NMTC application? Contact CBO Financial for a comprehensive project analysis to evaluate your eligibility, identify target CDEs, and develop a strategic application approach. Our team helps businesses and developers across the United States navigate the NMTC application process from initial assessment through successful closing.