Industrial Development Bonds, 501[C]  and Empowerment Zone (EZ) Bonds
Description: Industrial Development Bonds (IDBs), 501[C] and Empowerment Zone Bonds (EZ/EC) offer taxable and tax-exempt financing for commercial and industrial developments through the issuance of municipal bonds or certificates of participation. The bonds, sold to private investors, provide funds to borrowers at rates significantly below those of conventional financing. A local government agency or authority serves as a conduit issuer for tax exempt industrial development and EZ bonds while 501[C] certificates of participations are offered directly by qualified non profit corporations. These bonds provide low cost tax-exempt and taxable financing for private enterprises and non profit organizations in the State of California. The LDC arranges a finance team experienced in working with manufacturers, businesses located in the EZ and non profit organizations, in order to provide a timely and cost effective issuance of these tax exempt bonds.
Use of Funds: Funds may be used for property acquisition, equipment/machinery purchase, and building improvements/construction. Tax-exempt IDBs are restricted solely to manufacturing; EZ and taxable issues may be used for both manufacturing and non-manufacturing projects; 501[C]  certificates of participation can fund eligible facilities.
Eligibility Criteria: Projects must result in public benefits, such as job creation, for low- and moderate-income residents. For tax-exempt IDBs, state law requires that one job must be created for every $50,000 in bond funds issued. EZ bonds require 35% of a borrower's employees to reside in the Empowerment Zone. The 501[C]  certificates of participation are used by non profit or exempt organizations. The borrower must possess good credit and show evidence of sufficient income to service the debt. The borrower must be able to secure a letter of credit from a bank with a long term credit rating.
Funding Limits: The size of a tax exempt bond issue will vary. IDBs issues range from $1,000,000 to $10,000,000; EZ bonds are limited to $3,000,000 and 501[C]  bonds are limited to eligible project cost. In most cases, financing will cover the lesser of 75% of the project cost or the appraised value of the underlying property; however, the letter of credit provider will determine funding limits. A single bond issue may include construction, acquisition, renovation and permanent financing.
Term/Amortization: Terms range from 5 to 25 years, depending on the useful life of the underlying collateral provided as security.
Collateral: Real Estate and equipment.
Subordinated Financing: Additional capital in the form of subordinated debt may be available to qualifying borrowers under the LDC 504 ACE Fund program or other specialized capital access programs.