By Cruz-Taura, Ana
Partners in Community and Economic Development , Vol. 11, No. 2
Economic vitality is the cornerstone of a healthy community. More specifically, community development professionals often emphasize the importance of a community being able to sustain itself economically in order to ensure long-term growth and stability.
Despite the fact that there is a plethora of economic development programs available on a local, state, and federal level, the greatest challenge lies in securing an adequate capital infusion to support a prolonged revitalization cycle. In some cases, there is limited funding available that can provide a handful of small businesses with small loans. Too often the available funding cannot satisfactorily meet the credit needs of existing businesses or attract larger employers to the community.
Two new federally enacted economic development programs are intended to be a catalyst to spur capital investment into the economic core of our most challenged communities. The New Markets Venture Capital Program and New Market Tax Credit Program are in final stages of implementation to begin complementing ongoing revitalization initiatives in target areas next year.
These programs draw on a market-based approach to attract investment into long-neglected urban and rural geographies. The goal of both programs is to bring these isolated, under-served areas back into the macro-economic framework of the local, and potentially global, economy by re-establishing commercial channels and developing the assets unique to each community.
The New Markets Venture Capital Program and New Markets Tax Credit Program target a well-capitalized and sustained flow of investment into lower-income communities to support a long-term business development cycle.
New Markets Venture Capital
The New Markets Venture Capital Program (NMVC) Act of 2000 focuses on economic development in low-income areas. The U.S. Small Business Administration (SBA) has been charged with administering the program by selecting NMVC companies that will serve as the conduits for capital infusion and technical assistance in growing and strengthening small businesses.
As described by SBA, a NMVC company is a privately managed, newly formed, for-profit investment company established for the purpose of providing capital and operational assistance to smaller businesses located in specific rural and urban areas. These companies may have a variety of structures -- partnership, limited liability company, or corporation -- but must have been formed after December 21, 2000.
Several conditionally approved NMVC companies already exist, with their formal approval contingent on their ability to raise required amounts of regulatory capital and grant matching resources, as well as meeting other technical requirements for participation. Following formal designation of NMVC companies and funding commitments, the NMVC Program will provide up to $50 million in economic development funding in the coming year. …