> Spotlight on Loan Servicing, Workouts at OFN 2010
> CDFI Exchange Debuts at OFN 2010
> Success Stories
> Support CRF on Give to the Max Day November 16
> Unclaimed Cash: Create Jobs, Earn Federal Tax Credits

SEATTLE STEAM

Spotlight on Loan Servicing, Workouts at OFN 2010

Join CRF at this year’s Opportunity Finance Network (OFN) conference, November 2-5, 2010 in San Francisco. Stop by the CRF booth and chat with our community development specialists about industry trends and issues facing CDFIs in 2011 and beyond.

Also, CRF’s asset management expert Dawn Johnson will discuss loan workouts for small business and community facility loans at a breakout session, which convenes Wednesday, November 3 at 4:00 p.m. PST. Check the presentation calendar for more information.

Many community development loan funds, especially those overseen by city and county governments, do not have the resources to become adept at loan servicing or creative workouts. During periods of economic growth, community development loan servicing is relatively easy, but periods of decline call for a more personal, high-touch approach that allows borrowers more flexibility. In a poor economic climate, loan portfolio performance is crucial for leveraging scarce community development dollars. Therefore, fund managers should take steps to be responsive and help borrowers weather the economic storm.

Dave Moser is a borrower who worked with CRF to modify his community development loan terms, allowing him to improve cash flow and boost his business performance.

Moser owns Triangle Warehouse, a trucking and storage company in Greensboro, N.C. He has a New Markets Tax Credit business loan from CRF, GE Money and local nonprofit People’s Self Help. Faced with a cash flow shortage, Moser contacted CRF’s servicing department and asked to modify his payment schedule temporarily.

“We obtained more collateral from Mr. Moser and approved his request by reducing his minimum loan payments for up to six months,” Johnson said. “Today, Triangle Warehouse is more profitable after using its extra cash to seize a new business opportunity – liquidator inventory management.”

Moser, who did not draw a salary during the six-month period, has improved his cash flow and returned to his old payment schedule.

A “high-touch” approach to servicing alleviates bad situations before they start. Without a personal relationship with the loan servicer, this borrower may very well have defaulted on his obligation, putting his credit rating and employees at risk. But taking positive action from the start allowed Moser to improve his business, with cooperation from his creditors.

Contact crfusa@crfusa.com to learn more about CRF’s contract loan servicing capabilities.

CDFI Exchange Debuts at OFN 2010

For the first time, the OFN conference is harnessing its partnerships in the community development industry to launch a CDFI-to-CDFI Exchange. Many OFN attendees provide products or services that may be beneficial to other CDFIs, and CRF is no exception.

Contract loan servicing from CRF can save CDFIs time and money by allowing them to make more loans without upgrading to a costly servicing software system or dedicating more staff time to servicing activities. Third party servicing for community development loan portfolios combines the benefits of a high-touch, personalized approach of self-service with the automated reporting and high-tech, paperless transactions of a software solution.

Visit the Exchange Thursday, November 4 from 4:00 p.m. to 6:00 p.m. and learn more about CRF and its contract loan servicing options for CDFIs and other community development entities.

Success Stories

SEATTLE STEAM

Seattle Steam, a privately held district energy utility serving downtown Seattle, received a $32 million New Markets Tax Credit (NMTC) business loan from CRF and its lending partners to replace one of its natural gas-powered boilers with a state-of-the-art biomass combustion system, which uses renewable, cellulose-based plant materials as fuel.  

Seattle Steam supplies power to more than 50 percent of the square footage in its service area, including commercial and residential facilities serving low-income workers and residents. Because the Seattle Steam plant serves a census-designated low-income district, the biomass conversion project was eligible for NMTC financing, which provides tax incentives for investment in de-stabilized neighborhoods.

The new system collects, sorts, treats, transports, stores and blends biomass feedstock – in this case, clean urban waste wood from pallets, crates, woody yard waste, sawmills and cabinetmakers – to divert these materials from landfills and avoid greenhouse gas emissions. The boiler can generate 85,000 pounds of steam per hour, more than 60 percent of the plant’s entire steam output, and will burn between 200 and 240 tons of waste wood per day.

The project will create 80 full-time equivalent construction jobs and retain 26 full-time permanent positions in a low-income neighborhood. Since the start of the recession, Seattle’s unemployment rate has reached as high as 10 percent. With job growth from innovative employers, such as Seattle Steam, unemployment is now around 9 percent and has declined for the past two months.

GRUNDY TOWN CENTER

CRF also has closed a $37 million New Markets Tax Credit (NMTC) business loan to fund a multi-tenant retail, office and parking development in Grundy, Va. The project is the centerpiece of a downtown revitalization project more than 20 years in the making and is designed to boost employment and economic activity throughout rural Buchanan County.

Historically, Grundy and surrounding Buchanan County has been among the poorest rural census tracts in the United States, with a median household income of just $22,000 and an 18.9 percent poverty rate.

Since 1929, Grundy has suffered many major floods of the adjoining Levisa Fork River. After a significant 1977 flood, many downtown businesses did not reopen, and the buildings that housed them were abandoned. In 2001, the city razed the old downtown and relocated much of the town to higher ground by blasting a nearby mountain and platting a new 13-acre town center.

CRF’s $27.75 million NMTC allocation, coupled with a $9.6 million loan from local community development lender People Inc., provided the Town of Grundy with the financing it needed to complete construction of the new downtown and retail shopping center.

Support CRF on Give to the Max Day November 16

Last November, GiveMN – an online charitable donation portal – inspired donors to give more than $14 million to 3,434 Minnesota nonprofits in just 24 hours on Give to the Max Day. This year, GiveMN is awarding $20,000 and $10,000 grants to the two nonprofits that attract the largest number of individual donors on Give to the Max Day ­– Tuesday, November 16.

In addition, throughout Give to the Max Day, an individual donor will be randomly chosen every hour to have an additional $1,000 given to the charity that received the donor's original donation.

Last year, CRF raised more than $15,000 on Give to the Max Day – this year, we hope to raise more than $20,000. You can help by logging in to CRF’s GiveMN page on November 16 and donating any amount. Your donation benefits people and communities across the country by helping local lenders access capital for small businesses, affordable housing and community facility improvement.

Unclaimed Cash: Create Jobs, Earn Federal Tax Credits

Once small businesses get the capital they need to expand and improve their businesses, hiring workers to keep up with demand and increased capacity makes sense.

For community development lenders, one of the most important measures of economic impact in low-income neighborhoods is job creation, yet some entrepreneurs are cautious about hiring, even after receiving a loan for expansion or business improvement.

What these business owners might not know is they actually can get paid for creating jobs. All for-profit employers are entitled to federal and in some cases, state tax credits for hiring employees who live in specific geographic areas or have certain demographic characteristics. 

The Work Opportunity Tax Credit program encourages companies to hire employees who have been disconnected from the workforce for some reason, such as Veterans, formerly incarcerated individuals, members of families on food stamps and others. The tax credit is available for new hires with job start dates through August 31, 2011. In addition, individuals who live and work in federally designated Empowerment Zones and Renewal Communities are also eligible regardless of their socio-economic background.

The federal tax credits range in value from $1,500 - $4,800 per eligible employee and are used to offset a company’s federal tax liability. In the case of pass through entities, the credits will flow through to the member’s personal liability. In some cases companies can capture refunds from retroactive tax credits earned by employees that worked in the 3 prior years.

Most companies are earning these credits but are either unaware of the programs or have not pursued them because of the administration involved.

Additional information about these valuable incentive programs is available from your tax professional or online at http://www.doleta.gov/business/incentives/opptax/

The concept for this article is courtesy of John Hess, a tax professional. John can be reached at john.hess@retrotax-aci.com