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This is the seventh in a series of articles on doing business with Native American Tribes in Nevada.  These articles provide an overview of the political and business structures employed by Indian tribes, as well as the advantages and challenges of doing business in Indian Country.

Financing

Incentives for Foreign Investors (Immigrant Investor/EB-5 Visas)

Under the Immigrant Investor/EB-5 Visa program, foreign investors may obtain a U.S. Visa in return for investment of at least $1,000,000 and the creation of ten jobs within the United States.  In a Targeted Employment Area, defined as rural area or one with high unemployment (including on Indian reservations), a $500,000 investment is required.

Tax Exempt Bonds

Tribes and their subdivisions in certain circumstances are allowed to issue tax exempt bonds under the Tribal Governmental Tax Status Act to finance the exercise of an essential governmental function or to build a manufacturing facility on tribal trust lands.[1]  “Essential governmental functions” for this purpose are generally limited to those functions not including gambling, but “customarily performed” by state and local governments with general taxing powers (e.g., schools, roads, sewers, etc.).

Small Business Administration 7(a) Program

Tribal businesses are eligible for the SBA’s 7(a) Loan Guarantee Program if they meet SBA regulations regarding the nature of the business, the intended use of the proceeds, and lack of otherwise available credit.  Note that no more than 1/3 of gross annual revenue may come from gaming in order to maintain SBA eligibility.

USDA Low Interest Loans for Community Facilities

The U.S. Department of Agriculture (“USDA”) operates a direct loan and grant program to encourage the development of essential community facilities, such as: 1) health care facilities, including hospitals, medical clinics, dental clinics, nursing homes, or assisted living facilities; 2) town halls, courthouses, airport hangars, or street improvements; 3) community support services such as child care centers, community centers, fairgrounds or transitional housing; 4) fire departments, police stations, prisons, police vehicles, fire trucks, public works vehicles, or equipment; 5) Educational services such as museums, libraries, or private schools; 6) telemedicine or distance learning equipment; and 7) community gardens, food pantries, community kitchens, food banks, food hubs, or greenhouses.[2]  Federally-recognized tribes are eligible for loans or grants.

USDA Loan Guarantee for Rural Businesses (Business & Industry)

Indian tribes and federally-recognized groups may apply for the USDA’s Business & Industry Loan Guarantee Program.  The Program allows for loans on machinery, equipment, real property, improvement to real property, working capital, and refinancing up to $25,000,000, with the USDA guaranteeing amounts loaned by private financing sources as follows: 60% of loans over $10,000,000; 70% of loans between $5,000,000 and $10,000,000; 80% of loans between $2,000,000 and $5,000,000; and 90% of loans under $2,000,000.

U.S. Department of the Interior Capital Investment Program

The Department of the Interior, Office of Indian Energy and Economic Development (“IEED”) has an “Indian Affairs Loan Guaranty, Insurance, and Interest Subsidy Program.” The program provides guarantees of up to 90% of a loan amount (not in excess of $12,000,000) for businesses with at least 51% Indian ownership where the business will contribute to reservation economic development.  The Program also provides a loan insurance program for loans up to $250,000.

BIA Loan Guarantees for Indian Reservation Projects

Tribes may be eligible for loan guarantees from the BIA.  According to the BIA, “[t]he purpose of the Program is to encourage eligible borrowers to develop viable Indian businesses through conventional lender financing. The direct function of the Program is to help lenders reduce excessive risks on loans they make. That function in turn helps borrowers secure conventional financing that might otherwise be unavailable.”[3]  Borrowers must be a federally-recognized American Indian tribe or Alaska Native group, an individually enrolled member of such tribe or group, or a business organization with at least 51% ownership by American Indians or Alaska Natives.  The BIA provides guarantees of up to 90% of a loan amount for businesses with at least 20% Indian ownership where the business will be located on or near a reservation and must contribute to reservation economic development.  The maximum loan that can be guaranteed for individuals is $500,000; however, the Program can guarantee loans of greater amounts for tribes, tribal enterprises, or business entities, subject to program and policy limitations.

 


 

[1] P.L. 97-473, Title II, Section 202(a); IRS Code § 7871.

[2] 7 CFR, Part 1942.17(d) for loans; 7 CFR, Part 3570.62 for grants.

[3] http://bia.gov/WhoWeAre/AS-IA/IEED/LoanProgram/index.htm

 

About the Author

Jay Young is a Las Vegas, Nevada attorney. His practice focuses on business law, business litigation, and acting as an Arbitrator and Mediator.

Mr. Young can be reached at 702.667.4868 or at jay@h2law.com.