IDB Info

  • For manufacturing & 501-C-3 projects
  • $2,000,000 minimum
  • $10,000,000 Tax-Exempt maximum for manufacturers (Project size can be larger)
  • Typically 120 day closing process
  • Can do bridge loan to start project before IDB closes
  • Bank receives Taxable-Equivalent Yield or LC Fee
  • Bank is in 1st position on all assets
  • Full Banking Relationship Expected

null

Tax-Exempt IDB Uses

  • Acquire a building and renovate for use as a manufacturing or 501-C-3 facility (there are certain minimum renovation requirements)
  • Acquire land and build a new manufacturing facility or 501-C-3 facility
  • Expand on an existing site
  • Refinance existing debt (501-C-3 only)
  • Acquire the hard assets of a business (building and equipment)

Typical Financing Terms for Tax-Exempt IDBs (Bank Purchase Option)

  • Bank purchases bonds for own portfolio/balance sheet
  • Sample Rate Calculation (assume 20% tax-exempt discount)
  • Variable = (LIBOR Rate + Spread) x .80% =(1.50 + 2.00) x .80% = 2.80%
  • 7 yr FR = (Swap Rate + Spread) x .80% = (1.75 + 2.00) x .80% = 3.00%
  • Amortization = up to 25 years (depends on Useful Life of IDB Assets)
  • LTV is determined by Bank
  • 3% – 4% closing costs (portion can be financed in IDB)
  • Guarantees, collateral, security, up to Bank
  • Bank gets first position on all collateral
images

Typical Financing Terms for  Tax-Exempt IDBs (LC Option)

  • Bank issues LC @ 1.50%/year (5-year term)
  • Remarketing, Trustee, etc. total .25%
  • Variable (VRDN) Rate = 1.2%
  • 5-year tax-exempt swap rate = 1.75%
  • Tax-Exempt Cost of funds
    2.95% variable
    3.50% fixed (5 Years)
  • Amortization = up to 25 years (depends on Useful Life of IDB Assets)
  • LTV is determined by Bank
  • 3% – 4% closing costs (portion can be financed through IDB)
  • Guarantees, security, determined by Bank
  • Bank gets first position on all collateral

images

Tax-Exempt IDB (Cost/Benefit Analysis)

  • Save 1.5% – 2% / year in interest
  • Interest savings vs. SBA can total $1M – $2M over life of loan
  • Closing costs generally 3-4% (same as SBA)
  • Exempt from Doc Stamps & Intangible Taxes
  • 95% of Costs contingent on closing
  • IDBs finance construction and permanent
images

Taxable IDBs

  • Bank issues LC to back Taxable IDB
  • Finance or refi non-mfg. Warehouse/Distribution
  • No maximum
  • Also exempt from Doc Stamps & Intangible Taxes
  • Rate = LIBOR or equivalent plus fees
  • Can swap into fixed rate

Taxable IDBs Rate Calculation

  • Assume LIBOR = 1.25%
  • Assume 10-Year Treasury Swap Rate = 2.20%
  • Assume Annual LC Fee = 1.25%
  • Assume Annual Remarketing = .125%
  • Assume Annual Trustee = .05%
  • Floating Rate = LIBOR + LC Fee + Remarketing + Trustee = 2.68%
  • Fixed Rate = 10-Year Swap Rate + LC Fee + Remarketing + Trustee = 3.63%

images

images2

images3