Tax Credits Fueled Early Growth, Helped Distressed Community Thrive
The New Markets Tax Credit is a federal funding program administered through the Community Development Financial Institutions Fund, a division of the U.S. Department of the Treasury. Enterprise Financial CDE is a community development entity that uses NMTC allocation to partner with businesses and community service providers committed to investing in eligible, highly distressed communities to improve economic development and quality of life for residents of underserved populations and low-income communities.
St. Louis, Missouri
EFCDE’s NMTC Investment:
Use of Funds:
Working capital for new equipment and funded staff hiring for business growth
Business expansion that has ultimately created 110 jobs and new office headquarters in revitalized neighborhood
As an early stage information technology (IT) consulting business with a few dozen employees, what GadellNet lacked in traditional credit and collateral to fuel growth, it more than made up for in mission and vision.
Its goal was to become a premier employer and service provider of IT support services to small businesses and help spur economic development in its Botanical Heights, Missouri community. Thanks in part to funding from the New Markets Tax Credit (NMTC) program, the GadellNet team has been able to achieve both, while earning spots multiple years in a row on the St. Louis Business Journal’s 25 Fastest Growing Companies list and recognition across several “Best Places to Work” lists.
“Enterprise and EFCDE’s New Markets Tax Credit program is the catalyst that has helped us grow faster,” says Nick Smarrelli, Former CEO. “We were able to pursue bolder strategies than the competition and truly invest in our employees, and that helped facilitate our ongoing growth goals."
GadellNet qualified for funds from a loan from Enterprise Bank & Trust’s affiliate, Enterprise Financial CDE (EFCDE), available to businesses in distressed or rural communities but who lack access to capital from traditional channels or who need flexible loan terms to foster pivotal growth.
Obtaining working capital for new equipment and to hire staff fueled the business’s potential. Since that initial investment, GadellNet has grown from 35 employees to more than 145, moved its basement office to a headquarters in a renovated machine shop, and opened not only a second location in the newly developing and revitalized community, but expanded into three additional Midwest markets. GadellNet has also become one of Missouri’s few certified B Corps, as they invested in not only the underserved community, but also in environmental upgrades to their office space.
“Right from the start, managing growth and financing expanding infrastructure was GadellNet’s biggest challenge,” explains Smarrelli. “Growth is awesome, but it is expensive. Helping fund that growth is something we had to focus on and be pragmatic about. These funds helped us refinance some higher-priced debt, but most important, it provided working capital to help facilitate our growth. It helped with everything from equipment purchases, to acquiring technology, to affording staff that helps further our impact.”
For GadellNet, the economic benefits resulting from the NMTC program bolstered the company’s early business growth and also allowed the company to make a longer-term vision a reality. When ready to invest in more space for its growing team, GadellNet purchased and completely restored the façade of its first office space in Botanical Heights, rebounding from what was once known as one of the nation’s highest crime areas, with more than half of all structures vacant or in poor condition. “We knew we wanted to go to a neighborhood that needed revitalization. We’re all about people and giving back,” Smarelli said. The company later purchased, made tenant improvements and leased out additional buildings in the same block in the neighborhood to help change the face of Botanical Heights.
GadellNet didn’t just invest in its community infrastructure, but its people as well. “NMTC can be especially beneficial to fuel growing businesses that need capital to add staff or pursue new opportunities,” says Troy McClelland, EFCDE’s Vice President. “The favorable terms of the NMTC program give qualified businesses that would otherwise have expensive sources for that capital the favorable rates and the unparalleled flexibility to fund their operating expenses and allow the business to focus on its growth.”
The NMTC funds served as a springboard and allowed GadellNet to grow and add staff, explains Smarrelli. “It can take 90 to 120 days before new staff starts bringing in profit for us, so funding this bridge so we can onboard someone well — in a thoughtful and strategic way — has been something both our employees and clients appreciate."
The company has an open and generous recruiting philosophy. Bachelor’s degrees are not required for many of its roles, and training is offered both for skills-based performance as well as life skills. To help diversify its talent pool and improve opportunities for underserved populations, GadellNet recruits from and partners with local nonprofit organizations like LaunchCode and NPower, which help people enter the tech field through free training and paid apprenticeships. GadellNet also participates in educational programs, such as the local KIPP high school and Girls Inc., to encourage IT as a career for all genders.
As a testament to its priorities and success, GadellNet became a Certified B Corporation in 2020. Known as leaders in the movement for an inclusive, equitable and regenerative economy, Certified B Corporations are businesses that “put purpose above profit,” says Smarrelli, and are measured holistically along a company’s entire social and environmental impact.
Today, GadellNet is a 10-time Inc. 5000 fastest growing company, has won Fortune Magazine’s Top 100 Inner City Companies and a St. Louis Business Journal Corporate Philanthropy Award. Its investments in both its neighborhood and employees have also made a difference in employee retention. Over the last three years, Smarrelli reports recent retention rates of more than 93 percent; industry averages are approximately 70-75 percent. The high retention rate, positive corporate culture and strong training program have contributed to improving the economic stability of both its employees and communities. Given that GadellNet provides critical services for small businesses and nonprofits, its work helps promote and multiply economic development and essential community services in the communities their customers serve, not only in St. Louis, but the communities and clients supported by other offices and the businesses they serve.
“Community impact keeps us grounded,” Smarrelli says. “We are proud of our St. Louis roots and we are even prouder to have been part of the revitalization efforts in this area.”