Manufacturing

How it works

To qualify for financing, eligible projects must meet the following requirements:

  • 95 percent of the bond proceeds need to be spent on depreciable assets used in manufacturing
  • 75 percent of the bond proceeds must be used on assets that are considered essential to the manufacturing process. The other 25 percent can be spent on related and ancillary facilities
  • The borrower is limited to investing no more than $20 million in capital assets in the political subdivision where the investment is taking place. The investment cap is in place for three years prior to the issuance of the bonds and three years’ post-issuance

Additional items to note

  • The borrower can work with an equipment leasing firm (typically with a bank or leasing company) to structure a long term lease as a means to finance the equipment
  • Bonds are typically sold, and the proceeds are used to fund the transition in several different ways, including placing the bond privately with the borrower’s lending institution or an entity related to the borrower purchasing the bonds. Depending on the status of the borrower, the bonds can be sold in the marketplace on the strength of the borrower’s credit
  • Another option is to use a credit enhanced fund, like the Finance Authority’s Bond Fund, to sell the bonds in the marketplace. The Bond Fund allows for more competitive rates for the borrower and allows them to take advantage of the series of reserves in place ($10 million in cash and a Letter of Credit)
  • The rates of the bonds are set at the time they are issued. The rate is derived from a number of factors, including: the term of the financing, the underlying credit strength of the borrower and the financing structure of the transaction. The term is set based on the useful life of the asset. Machinery and equipment is usually financed over a five to seven-year term