Seedco Financial's Subsidiary, ERF

The Empowerment Reinvestment Fund LLC (ERF), a subsidiary of Seedco Financial, has been awarded $75 million of New Markets Tax Credits from the CDFI Fund in three tranches: $40 million in June 2006, $25 million in May 2004 and $10 million in March 2003. This highly competitive award is a part of the $15 billion, seven-year New Markets Tax Credit (NMTC) Program, enacted in 2000 to encourage economic development investment in low-income communities nationwide.

Where tax credits are distributed
ERF finances projects throughout the US, but focuses its efforts in its primary target areas: Alabama, Colorado, Mississippi, New York and Tennessee.

Eligible businesses
Federal guidelines require that investments meet two criteria: first, they must be located in low-income communities-defined as having a median income below 80% of the median income in the surrounding area. Second, projects must show that they provide substantial services to their communities or that they are located within that community.

Seedco Financial's guidelines ensure that NMTC support its objectives in particular target areas, which include: (1) large-scale job development projects; (2) projects that support small business development; and (3) projects that enhance the capacity of minority serving institutions. In all cases, ERF seeks to leverage other Seedco Financial and Seedco resources into these projects.

Protection for ERF investors
ERF follows the same extensive due diligence procedures developed for Seedco Financial's other loan funds. The financial components of each transaction and the financial history of each participant are carefully reviewed to ensure that the interests of the investors are protected.

Benefits to investors
Low interest, high return—in return for a qualifying investment, investors will receive a 39% tax credit over seven years for each dollar invested plus negotiated economic return.

Investors may claim a tax credit of 5% of the total value of the investment during each of the first three years and of 6% on the total value of investment for each of the final four years of the credit period, for a total of 39%.
Investors will receive an additional return on their investment, usually in the form of interest on indebtedness, as well as the return of principal at the end of the seven-year investment period.
Alternatively, investors may choose to purchase only the tax credits or to finance the entire project.

Benefits to the community
All loan documents contain community covenants that require all parties in the project to work together to leverage other resources and to develop programs to enhance its community impact.

For more information, contact Kayla Rosenberg at (212) 994-2742 or krosenberg@seedco.org.