NAC and Native American Development Corporation: An Approach to Tribal Economic Development
The provision of technical assistance (TA) plays a pivotal role in promoting economic growth and development in tribal communities. Geographically dispersed tribal governments can face unique challenges in accessing resources and navigating complex financial landscapes. Organizations like NAC and the Native American Development Corporation (NADC) use their expertise to bridge this gap, offering tailored support and services to tribal entities.
NAC was founded in 2001 by a core group of American Indian financial and economic development leaders that saw the need for a Native American-sponsored and controlled strategic advisory services entity. NAC received startup working capital grants (a rare occurrence in the case of for-profit entities) from the Community Development Financial Institutions (CDFI) Fund of the US Department of the Treasury. NAC mediates the “space” between and among the tribes, the Federal government, and the non-Indian financial and business communities.
This space includes:
- Venture Capital
- Hedge Funds
- Angel Investors
- Large, Commercial Banks
To that end, NAC provides specialized strategic expertise and advanced “know how” to their clients. The founding leadership group, based in the greater Washington, DC region, has many years of experience bringing these three sectors together around
creative and innovative Native American economic development and financing projects.
NAC structures a range of financial vehicles from simple to complex instruments including tax credits, grants, loans, equity, tribal bonds and federal loan guarantees to maximize tribal financing opportunities at the highest possible return at the lowest cost. NAC also provides organizational and legal structuring services include determination and establishment of alternative corporate structures such as Section 17, LLC, C and S-corporations.
Building Opportunities and Maximizing Tribal Resources
NAC provides tribes, tribal businesses and individual Indian-owned businesses a full array of economic development, investment banking, business advisory, and merchant banking services. NAC undertakes comprehensive, strategic economic development planning for tribes and implements these plans by structuring all necessary legal and tribal organizational infrastructures so that its tribal clients can maximize the value of their assets and business opportunities afforded by the unique status of tribes within the US Federal system.
NAC acts as a financial advisor and intermediary between tribes and third party financing institutions, including banks, Federal agencies, private equity funds, angel investment groups, and large to mid-size corporations. NAC is an expert in creating and structuring a variety of hybrid and blended financing mechanisms that employ tax credits, Federal grants, tribal revenue bonds, and BIA and other loan guarantees to maximize tribal financing opportunities at the highest possible ROI and lowest possible cost.
In particular, NAC has special expertise in guiding tribes in the necessary economic and business diversifications from their base in the gaming and hospitality industries into a full array of non-gaming business activities.
Origins of Success and Impact in Tribal Economies
NAC is a specialist in community development banking and finance. It assists “community development financial institutions” and “community development entities” sponsored by Native American tribes across the United States. NAC has advised tribes on establishing new CDFIs and CDEs and negotiating re-purchase of loan portfolio agreements from regional banks. In 2011, one of NAC’s tribal CDFI/CDE clients received an $18 million allocation of new markets tax credits (NMTCs) to serve a National Indian Country Service Area—only the second tribe ever to receive a NMTC allocation from the US Department of the Treasury. NAC also assisted several tribes to successfully qualify for over $75 million in bond issuing authority under the Tribal Economic Development Bond (TEDB) program.
NAC assisted a tribal client in the formation, capitalization, and certification of its new CDFI. NAC drafted a new Tribal LLC code for the tribe and incorporated the new CDFI as a Tribal LLC. Then, NAC repatriated from a local bank the tribal loan portfolio, which was assigned to the new entity, creating a performing balance sheet for it. The bank had been charging extremely high rates of interest for these tribal loans (15% on average per loan). By transferring the loan portfolio in-house to the new, tribal CDFI, NAC was able to lower charges to the borrowers to an average of about 8% per loan and internalize this revenue stream to a tribally-owned corporation. NAC established all of the internal operating controls for the tribal CDFI, staffing plan, underwriting guidelines, purchased loan portfolio management software and installed it, and provided early consulting assistance to its Executive Director. NAC wrote and successfully secured funding for a NACA TA grant for the tribal CDFI. This innovative project was recognized by NAFOA as its annual “Deal of the Year” in 2008.
Implementing Plans for Geographically Dispersed Tribes
NAC recently organized seven small tribes to participate in the State Small Business Credit Initiative (SSBCI) program of the US Department of the Treasury. The seven tribes comprising the SSBCI Small Tribes Consortium are being provided a variety of ongoing TA business and economic development services to augment and enhance the tribe’s advanced and sophisticated business and economic development staffs development access to financing through the SSBCI program. The SSBCI financing will serve as an important component to the capital stacks being developed by NAC with its tribal business development partners. The forms of TA provided by the NADC-NAC team include, but are not limited to:
- Regular Video/Conference Call Meetings
- Periodic On-Site Visits
- Business Plan Development
- Strategic Partnering with Outside Businesses
- Negotiation of Complex Financing Structures
