Taxable Bond Program
Tax-exempt industrial development bonds (IDBs) have been limited to smaller manufacturing concerns and 501(c)(3) organizations since 1986, and incur 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 generally feature a floating rate but can be converted to a fixed-interest rate.
The Process
The applicant must complete a simple application and submis it to the St. Louis County Industrial Development Authority where a team of professionals will 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 the Borrower
- The floating tax-exempt bond rate has been priced significantly lower than prime since 1990. Therefore, the major advantage of this finance program is the interest rate savings. For current rates, and/or a comparison of bank debt versus taxable loans, please contact the Economic Council.
Benefits to the Bank
- The bank has 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 and term of three to five years. This results in a AAA bond rating.
For more information, contact Rick Palank at 314.615.7667 or rpalank@slcec.com.
Taxable Bond Application
View Prime vs. Taxable Rates
Fee Schedule - Taxable Bonds
