Industrial Development Bonds

Tax-exempt Industrial Development Bond (“IDB”) financing is available to promote investment in land, buildings and new equipment associated with domestic manufacturing and processing operations. Advantages are that private-sector entities can borrow at the low interest rates normally reserved for state and local government entities.

Important features of IDB’s for Manufacturers and Processors:

• The Bonds must be used to finance manufacturing or processing facilities and/or equipment;
• $10 Million Limit – Capital expenditures of the borrower, including the bond issue proceeds, cannot exceed $10 million during the six-year period beginning three years prior to the date of issuance of the bonds and ending three years after the issuance date, including the creation of new jobs;
• Letter of Credit – The borrower must secure a letter of credit from a bank with a minimum long-term credit rating of “A-“;
• Low Interest Rates – The all-in annualized cost for most borrowers is 20% to 35% below conventional alternatives;
• Long-Term Maturity – The maturity of an IDB will typically be longer than conventional financing, often up to 30 years;
• Comprehensive Funding – The funds can be used for construction and take-out to finance land, buildings and equipment; and,
• No Pre-Payment Penalty

Pollution Control Financing
Direct loans, conventional loan guarantees, tax-exempt or taxable bonds and loan portfolio insurance are available for qualified pollution control projects, including land and buildings attributable to the project, equipment and engineering fees. The program also funds related financial and administrative expenses. Available through the California Pollution Control Authority.

USDA Business & Industry Loan Guarantees
The U.S. Department of Agriculture sponsors “Business & Industry” guaranteed loans in rural communities. Guarantees up to 80% on loans from $750,000 to $5 million and up to 70% on loans up to $10 million. Rates can be fixed or variable negotiated between lender and borrower.
Terms: 7 years for working capital, 15 years on equipment and 30 years on real estate.

Project must be in a rural area of 50,000 population and below and beyond the urbanized periphery surrounding a city of 50,000 or more.

Capital Investment Incentive Payments
This program enables cities and counties to negotiate property tax rebates with high-tech manufacturing companies. Ability to cap the taxable value of any new high-tech manufacturing plant at $150 million annually for up to 15 years. The manufacturer is then charged an annual “community services fee” of approximately $2 million.

Local Revolving Loan Funds
“Gap financing” for working capital, machinery, equipment, and real estate available in Tulare County. Revolving Loan Funds are guided by policies that outline loan sizes, uses, rates, terms, special conditions and participation levels.

Redevelopment Area
Various forms of financial assistance are available through local redevelopment agencies. Redevelopment is funded through incremental property tax revenue increases that are a direct result of private investment and increased property values. Assistance may be in the form of fee reductions, infrastructure improvements, land cost reductions, mortgage interest reductions, rehab/demolition/clearance of structures and utility tax rebates.

Recycling Market Development Zone Revolving Loan Program
This program makes capital available for California manufacturers that recycle raw materials, produce new recycled products or that reduce waste from the manufacture of a product.

These loans promote market development for post consumer and secondary waste materials and divert waste from non-hazardous California Landfills. Funds can be used to acquire equipment, make leasehold improvements, purchase recycled raw materials and inventory or acquire real property. Applicants may borrow a max of 75% of the cost of a project or $2 million. Terms are generally 10 years and low interest rates are fixed.

Small Business Loan Guarantee
Provides loan guarantees on revolving lines of credit, small loans and agricultural loans, not typically served by the federal Small Business Administration (SBA).

To qualify, a borrower must not be able to obtain credit through traditional channels, but must still demonstrate reasonable capacity to repay the loan. Maximum guarantee is 90 percent of the loan amount, not to exceed $500,000 (there is no limit on the loan amount) with the guarantee not to exceed seven years.

U.S. Small Business Administration 504 Loans
SBA 504 Loans are marketed, processed, closed and serviced by Certified Development Corporations. Loans provide small businesses the ability to finance the acquisition of long-term fixed assets, such as land, building, machinery and equipment as well as construction, modernization, renovation or restoration of facilities.

Private sector participant finances 50 percent of the project cost, SBA finances up to 40 percent or up to $1 million and borrowers inject 10 percent in the form of cash or equity in real estate. Terms are up to 20 years.

Eligible businesses must be a for-profit corporation, partnership or proprietorship with a net worth (including affiliates) of $6 million or less. The result of one full time equivalent job for every $35,000 of SBA funds is desired within two years of project funding.

To get connected to our finance partners, contact the EDC.