The
Business Finance Authority's Tax-Exempt Industrial Development Bond (IDB)
Program provides credit worthy manufacturers below market rate financing for the
purchase of fixed assets. The goal of the program is to create employment by
providing value added manufacturers with the capital needed to expand their
operations.
The
key feature of the IDBs is their tax-exempt status which lowers the cost of the
financing. If a project qualifies, interest paid on the bonds is exempt from
federal income taxes. Tax-exempt rates vary depending upon prevailing market
conditions but variable rates are historically well below prime.
IDBs
are not direct obligations of the BFA or the State of New Hampshire. The
individual or corporation on whose behalf they were issued is legally obligated
to repay them. The State has no obligation to repay the holders of IDBs and does
not in any way guarantee these bonds.
Eligibility
*Manufacturers
-
companies which manufacture or
produce tangible personal property, including processing resulting in a
change in the condition of such property. Uses such as software companies and
wholesalers are not considered manufacturers.
*Project
must be located in New Hampshire and create or retain jobs in the state.
*At
least 75% of bond proceeds must be spent on core manufacturing space and
equipment. Storage, office and R&D space must be excluded from this
calculation. A borrower can allocate costs to comply with this requirement. For
example, if only 50% of total funding will be used for manufacturing space, 67%
of total project funding could be provided by IDBs (.50/.75), with the balance
coming from other funding sources.
*Total
capital expenditures with respect to all facilities
(not just those being financed) in the municipality where the project is located
are limited to $20 million during the six year period starting three
years before and ending three years after the date the bonds are issued.
*Borrowers
may not have more that $40 million of tax-exempt bonds outstanding nationwide.
Use of Proceeds
*Fixed
asset expansion projects including the acquisition,
renovation and construction of buildings and the purchase of land and new
equipment.
*Project
size ranges from approximately $500,000 to a federally imposed maximum of $10
million.
*Bond
proceeds may be spent over three years.
*If
a borrower is purchasing an existing facility, 15% of bond proceeds must be
applied to renovation of the facility.
*Bond
proceeds for land acquisition cannot exceed 25% of the total bond amount.
*Non-capitalizable
costs, which include issuance costs, cannot exceed 5% of bond proceeds. Up to 2%
of bond proceeds can be used for issuance costs.
*Bond
proceeds cannot be used to refinance existing debt.
Structure
IDBs
are sold either in the public market or through private placements with
institutional investors. In some cases, a rated letter of credit may be
necessary to attract investor interest. The BFA maintains a list of investors
which have expressed an interest in purchasing IDBs.
Process
Interested
companies should contact the BFA for an application. The prospective borrower
completes an application and submits it with the application fee to the BFA. A
summary of the company and its project, along with a resolution prepared by bond
counsel to determine eligibility, are presented to BFA's Board of Directors for
Preliminary Official Action. Projects must receive Preliminary Official
Action from the BFA Board of Directors before costs are incurred to be eligible
for reimbursement from bond proceeds.
Once
a financing commitment has been obtained and documentation is completed, the
project will be presented to the BFA Board for Final Approval. After Final
Approval is granted, the project then must be approved by the Governor and
Council at a public hearing. The bonds can then be closed.
The
Directors of the BFA normally meet on a monthly basis. In order for an item to be placed on
the agenda, all materials must be in our office two weeks prior to the meeting
date.
Fees
A
non-refundable application fee must accompany the application to the BFA. The
application fees are as follows:
Bond
Amount
|
Application
Fee
|
|
$0 --
1,000,000
|
$400
|
|
$1,000,001
-- 2,000,000
|
$600
|
|
$2,000,001
-- 10,000,000
|
$800
|
|
$10,000,001
-- and over
|
$1,000
|
Upon
issuance of the bonds, the BFA will charge the company a one-time issuance fee
as follows:
|
Bond term
less than 10 years; > $2,000,000
|
5/8%
|
|
Bond term
less than 10 years; <$2,000,000
|
1/2%
|
|
Bond term
more than 10 years; > $2,000,000
|
3/4%
|
|
Bond term
more than 10 years; <$2,000,000
|
5/8%
|
In addition,
the company is responsible for the fees of the BFA's bond counsel.
Application
List of Prospective Bond
Purchasers
