By Monica Edwards, Senior Vice President | Director of New Markets Tax Credit
For many aspiring entrepreneurs and business owners, acquiring a business is a significant financial hurdle. Traditional financing options may not always be accessible, particularly for small business owners in underserved communities. However, one often-overlooked solution exists: New Markets Tax Credits (NMTCs).
The NMTC program, established by Congress in 2000, is designed to attract private investment into economically distressed communities by providing tax incentives to investors. While NMTCs are commonly associated with real estate development, their role in facilitating business acquisitions is gaining attention. These tax credits can be leveraged to infuse much-needed equity into business transactions, enabling entrepreneurs to secure ownership of existing businesses and sustain local economic growth.
How NMTCs Work for Business Acquisition
The NMTC program functions by allowing Community Development Entities (CDEs) to allocate tax credits to investors who, in turn, provide funding for eligible businesses. This capital can be structured as below-market debt or equity financing, reducing the financial burden on the business acquirer. Unlike conventional loans, NMTC financing often comes with flexible terms, including lower interest rates, longer amortization periods, and partial debt forgiveness.
Business acquisitions require substantial capital, and equity gaps often prevent many entrepreneurs from successfully completing transactions. NMTCs help bridge this gap, providing equity-like capital that strengthens balance sheets and increases financial stability. For minority and women entrepreneurs, who frequently encounter systemic barriers to capital, NMTCs offer an opportunity to build wealth and sustain long-term business success.
The Impact of NMTCs on Local Economies
Investing in business acquisitions through NMTCs does more than just help individual entrepreneurs—it has a ripple effect on entire communities. By facilitating the transition of existing businesses to new owners, NMTC financing preserves jobs, maintains essential services, and fosters economic revitalization. Rather than allowing longstanding businesses to shutter due to lack of succession planning, NMTCs ensure continuity and prevent economic downturns in vulnerable areas.
At TruFund Financial Services, we have witnessed the transformative power of NMTCs in helping entrepreneurs acquire businesses and scale their impact. Our commitment is to empower small businesses by providing innovative financial solutions that create wealth and opportunity where they are needed most.
Accessing NMTC Financing
While NMTCs are a powerful tool, navigating the program’s complexities requires expertise. Business owners interested in leveraging NMTC financing should seek guidance from experienced financial institutions, such as TruFund Financial Services, or Community Development Entities that specialize in NMTC transactions. By partnering with these entities, entrepreneurs can access tailored financing solutions that align with their business acquisition goals.
If you are looking to acquire a business and need equity to make it happen, NMTCs may be the key to unlocking your entrepreneurial dreams. With the right financing structure and strategic partnerships, business ownership can be within reach—fueling both individual success and broader community prosperity.
