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SLCEC Business Finance Division
Financial Products and Services for Business |
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We Bring Big Business Financing Solutions
to Your Small Business Opportunity! |
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SLCEC Business Finance Division is a valuable resource center for businesses thatneed conventional, alternative or combined financing solutions. With fixed-asset loans to venture capital and specialty loans, our business finance professionals have the tools and talent to help you put together the funds and terms you need to grow your business.
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Fixed-Asset Loans & Tax-Exempt Bonds
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U.S. Small Business Administration
(SBA) 504 Loan Program
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| The SBA 504 loan program is an ideal way to save much-needed working capital when making a fixed asset acquisition. With an SBA 504 loan you can finance up to 90 percent of your total project cost and lock into a low 20-year fixed rate. |
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| With the SBA 504 loan and its low 10 percent down payment provision a business owner can retain additional funds to help cover a number of unforeseen expenses that may result from such a move. In addition, most of these acquisitions are a direct result of increased business opportunities. The lower equity injection keeps cash available to help support the continued expansion of the business. A $500,000 investment in a new building will allow the owner to save $50,000 in equity (versus the typical $100,000 required under conventional financing) that can then be used for a number of business related needs. |
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Examples of Fixed Assets Eligible for an SBA 504 Loan
Nearly any project involving the purchase, construction, or improvement of fixed assets is eligible for SBA 504 financing: |
| • Land acquisition |
• Building acquisition |
| • Building renovation |
• Building construction |
| • Purchase of heavy machinery and equipment (new or used) |
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Eligibility Criteria
Almost any type of business is eligible: manufacturer, distributor, retailer, service company, etc. Start-ups as well as existing businesses are eligible. |
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| Business Benefits of an SBA 504 Loan |
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Low down payment --- usually 10 percent
preserve your company's cash for working capital |
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Competitive interest rate --- don't pay more for money than necessary |
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Fixed interest rate for the term of the loan --- normally 20 years
locked-in rate allows your company to better protect against
interest rate fluctuations |
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Asset may be owned by a "passive entity" and leased by the operating company --- position yourself for an additional tax benefit |
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Financing that fits project sizes from $125,000 and up --- the financing flexibility your growing company needs |
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| Where the Money Typically Comes From to Fund a Project |
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Bank: 50 percent of project's total cost |
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SBA: 40 percent of project's total cost |
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You/Your Company: 10 percent down payment |
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For more information: Please call Rick Palank at 314.615.7667 |
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TAX-EXEMPT BONDS - MANUFACTURERS |
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To promote manufacturing, tax-exempt bonds are available through the SLCEC Business Finance Division. The standard tax-exempt bond program provides manufactures with $2 million to $10 million in project financing, which can be used to finance the following:
Examples of Fixed Assets Eligible for a Tax-Exempt Bond Program |
| The following fixed assets are typically eligible for tax-exempt bond financing: |
| • Land acquisition |
• Building construction |
| • NEW machinery & equipment |
• Interest expense during construction |
| • Demolishing, removing, or relocating buildings or structures on land acquired |
| • Issuance expenses - up to 2 percent of the net proceeds of the issue |
| • Engineering and architectural surveys, plans, and specifications |
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| Business Benefits of a Tax-Exempt Bond Program |
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Tax-exempt bonds typically are the lowest-cost form of financing available |
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Interest rate savings typically 1.5 percent - 2 percent compared to conventional financing |
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Financing that fits a variety of project sizes projects range from $2 million to $10 million |
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| For complete information about manufacturing bonds click here. |
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Tax-Exempt MINI-BONDS for Manufacturers |
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The manufacturing mini bond program provides manufacturers with cost-effective, tax-exempt financing for capital projects smaller in project size. If you are a manufacturer, tax-exempt mini bonds provide financing from $500,000 to $2 million.
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Business Benefits of a Tax-Exempt Mini-Bond Program
- Tax-exempt bonds typically are the lowest-cost form of financing available
- Interest rate savings typically 1.5 percent - 2 percent compared to conventional financing
- Pre-approved standardized loan documents cash-in with lower costs and quicker turnaround
- Reduced fees service providers (bond counsel, trustee, & SLCEC) reduce their fees due to smaller project size and pass the savings on to you
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| For more information: Please call Rick Palank at 314.615.7667 |
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TAX-EXEMPT BONDS – 501(c)(3) ORGANIZATIONS |
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If you are a 501(c)(3) organization, tax-exempt bonds may be used to finance the cost of capital items including: land, building, fixtures, machinery and equipment (new or used), computer systems, and telephone and communication systems. Tax-exempt bonds can be used to refinance existing taxable debt and issuance expenses of up to 2 percent of the net proceeds of the issue.
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Business Benefits of a Tax-Exempt Bond
Program for 501(c)(3) Organizations
- Few tax limits, no volume cap allocation needed, no capital expenditure limits
- Project size can range from $2 million to $100 million
- Tax-exempt bonds typically are the lowest-cost form of financing available
- Interest rate savings typically 1.5 percent - 2 percent compared to conventional financing
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For complete information about Tax-Exempt Bonds for 501(c)(3) Organizations click here.
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Tax-Exempt MINI-BONDS for 501(c)(3) Organizations |
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The 501(c)(3) mini-bond program provides organizations with cost-effective, tax-exempt financing for capital projects smaller in project size. If you are a 501(c)(3) organization, tax-exempt mini-bonds provide financing from $500,000 to $2 million. |
Business Benefits of a Tax-Exempt Mini-Bond Program
- Tax-exempt bonds typically are the lowest-cost form of financing available
- Interest rate savings typically 1.5 percent - 2 percent compared to conventional financing
- Pre-approved standardized loan documents cash-in with lower costs and quicker turnaround
- Reduced fees service providers (bond counsel, trustee, & SLCEC) reduce their fees due to smaller project size and pass the savings on to you
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| For more information: Please call Rick Palank at 314.615.7667 |
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| Tax-exempt bonds to finance facilities owned by a 501(c)(3) organization are typically issued by the Industrial Development Authority of St. Louis County, Missouri (the IDA). State statutes have precluded the IDA from issuing a special type of tax-exempt bonds – bank qualified bonds. Recently the IDA has partnered with the Port Authority of St. Louis County to provide qualified 501(c)(3) organizations access to bank qualified bonds (BQBs). |
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The Bank Qualified Bond program offers several advantages:
- Like the tax-exempt bonds described above, bank qualified bonds (BQBs) significantly lower interest rates due to the tax-exempt status of interest to the purchaser of the bonds.
- In addition, BQBs provide a reduction in the bond interest rate – in some cases as much as 100 basis points! This reduction is due to a unique feature of BQBs – the carrying costs of the bonds are tax deductible to the participating bank.
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| For more information: Please call Rick Palank at 314.615.7667 |
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| Tax-exempt industrial development bonds (IDBs) have been limited to smaller manufacturing concerns and 501(c)(3) organizations since early 1986. As noted in the descriptions above, however, tax-exempt bonds have many restrictions. The beauty of taxable bonds is that there are no restrictions or limitations. Literally, any type of business can access the bonds. Further, taxable bonds can be used for any business purpose from fixed assets to working capital.
Taxable bonds can provide significant savings in interest expense because the bonds are sold to mutual funds, money market funds, insurance companies, pension funds, etc. The bonds must be backed by a letter of credit – typically provided by the company’s bank of account. Like most bank loans, these bonds typically feature a floating rate, but can be converted to a fixed interest rate. |
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The Process
The applicant completes a simple application and submits it to the St. Louis County Industrial Development Authority. A team of professionals has been assembled to work on the company’s bond issue. While the issuance expenses are based on the size and complexity of the transaction, using an experienced and consistent team will result in both cost and time efficiencies.
Benefits to Borrower
- The floating tax-exempt bond rate has been priced significantly lower than prime since 1990. Thus the major advantage of this program is the interest rate savings. For current rates, and/or for a comparison of bank debt versus taxable loans, please contact the Economic Council.
Benefits to Bank
- The ability to offer its valued client a significant amount of interest savings by providing a letter of credit. Smaller banks can utilize a confirming letter of credit from The Federal Home Loan Bank (FHLB) for a very low annual fee for a term of three to five years. This results in a "AAA" rating for the bonds.
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For additional information: Please contact Rick Palank at 314.615.7667 |
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