FREQUENTLY ASKED QUESTIONS

What is tax-exempt financing?

A tax-exempt bond earns interest for the bondholder that is “double-tax free,” meaning it is exempt from Federal (and often, State and Local) taxes.

How does the Tax-Exempt bond lower the borrower’s interest rate?

Bondholders of tax-exempt bonds earn interest that is exempt from Federal (and often, State and Local) taxes.  As a result, bondholders are willing to accept a lower interest payment from a tax-exempt bond vs. a taxable bond, and the borrower benefits from a lower interest rate on the bond.

What borrowing costs are typical?

Our typical borrowers are currently paying an all-in variable interest rate of 2.50% or less.  These rates include interest paid to bondholders and an estimate of all other annual ancillary fees. 

The all-in annualized cost for most borrowers is 20% to 30% below conventional alternatives.  In fact, the total tax-exempt borrowing costs for our clients are often below the rates paid by IBM, GE, and General Motors.

Why work with Growth Capital?

Growth Capital is an expert in structuring and completing tax-exempt financings for nonprofits, manufacturers and waste recycling organizations.

Tax-exempt bond financing and Industrial Development Bonds (IDBs) are typically underused, as the rules governing these financings can be complex. Technical expertise, extensive experience, and a proven track record in completing these financings are critical to success.

Growth Capital has assembled a cohesive finance team, consisting of leading tax-exempt and IDB professionals, who have worked together for over 15 years.  This experienced team has completed more than $500 million of financings.

What are the criteria for a Nonprofit to use Tax-exempt bonds?

Every client and project is different, and Growth Capital will help you determine how to best finance your project.

In general, however, our clients are:

-Nonprofits – 501 (c)(3) organizations

-Acquiring fixed assets – land, building, or new equipment

-Projecting a financing need of $2 million, with total project costs projected to be less than $20 million.

-Located throughout California, without limit to specific communities Eligible for a conventional bank loan

What types of nonprofits use this financing?

Nonprofit corporations that have used this type of financing include: independent and special-needs schools, humane animal care organizations, YWCAs, YMCAs, Goodwills, health clinics, mental health centers, senior independent and assisted living facilities, and many other types of community service organizations. 

What is an Industrial Development Bond (IDB)?

IDBs allow Federal & State income tax exemptions for U.S. manufacturing and processing companies making investments in land, buildings and new equipment that are associated with U.S. manufacturing and processing.   These tax benefits make IDB financing the most competitive financing option available for manufacturers.

How does the IDB lower the borrower’s interest rate?

Bondholders of IDBs earn interest that is exempt from Federal (and often, State and Local) taxes.  As a result, bondholders are willing to accept a lower interest payment from a tax-exempt bond vs. a taxable bond, and the borrower benefits from a lower interest rate on the bond.

What are the criteria for a manufacturing company to use IDBs or Tax-exempt bonds?

Every client and project is different, and Growth Capital will help you determine how to best finance your project.

In general, however, our clients are:

-Acquiring fixed assets – land, building, production facilities, or new manufacturing equipment

-Projecting a financing need of $2 million, with total project costs projected to be less than $20 million.

-Engaged in manufacturing activities that result in public benefits – e.g., job creation or retention, utilization of a vacant building, increased energy efficiency, etc.

-Located throughout California, without limit to specific communities or restriction on business size.

-Eligible for a conventional bank loan

What types of manufacturing companies use this financing?

Growth Capital has assisted many manufacturers and processors, often companies in the following industries: food processing; plastic injection molding; furniture; packaging materials; metal finishing and fabrication; and other manufactured products. 

What if my project is ineligible for tax-exempt bonds?

Growth Capital can also help to arrange for taxable bonds, which can be an attractive alternative.  We have helped clients refinance current debt at lower than conventional rates by using taxable bonds.

What is Growth Capital’s fee structure?

Our fees are included in the cost of the financing, and we are paid when the deal is completed.  That is, we are compensated when the client’s financing is successfully completed.

Our fees are included in our estimates of cost savings.  Our typical borrowers are currently paying an all-in interest rate of under 2.50%, and theses rates include interest paid to bondholders and an estimate of all other annual ancillary fees. 

Why haven’t I heard of this type of financing?

Tax-exempt financing is typically underused by non-profits and manufacturers, as the rules governing these financings can be complex.  Traditionally, large financial institutions prefer more conventional lending products, as they are simpler to price and administer.

Growth Capital’s focuses exclusively on client need, and in particular, on saving money via cost-effective financing options.  We have significant experience in helping clients use this financing successfully.