A ONE-STOP SHOP FOR ED FINANCING RESOURCES & REFERRALS
Financing Available Now for Manufacturing
The California Association for Local Economic Development (CALED)
CALED's Commitment to Support Local Economic Development
As the recognized statewide leader in advocating
expansion of economic development financing opportunities, CALED is committed
to directly addressing gaps in the ED financing arena by establishing
the California Enterprise Development Authority (CEDA) Joint Powers Authority
(JPA). CEDA's Phase I goal is to maximize the availability of capital
to California small and medium sized businesses for expansion and job
creation through an innovative gap financing program. In Phase II, CEDA
will act as a statewide clearinghouse for ED financing resources - going
beyond the rules and regulations of financing programs to provide referrals
and assistance in structuring projects and in finding the most appropriate
avenues to get them financed. Learn more
about CALED.
The CEDA Difference: What is
a JPA?
Under the laws of the State of California,
a JPA can be created by two or more jurisdictions to undertake certain
activities permitted by each. While all cities and counties in California
have the ability to issue conduit revenue bonds for qualifed housing and
economic development projects, many utilize JPAs to gain transaction economies
of scale, access specialized transaction skills and avoid using precious
staff time on these types of transactions. While there are a small number
of statewide issuers, there are no issuers dedicated to economic development.
The California Enterprise Development Authority will be dedicated to the
issuance of conduit revenue bonds for economic development projects.
A Powerful Incentive for Business Expansion
CEDA offers a focused economic development financing
program combining tax-exempt and taxable IDBs with low-interest subordinate
loans resulting in a low down payment and a low blended interest rate.
CEDA has secured a commitment from its partner Community Reinvestment
Fund (CRF) to provide these subordinate loans, providing CRF's credit
requirements are met. Given that IDBs are typically "strong credits,"
this should not be a stumbling block.
Bonds are obligations of the business borrowers who must meet stringent credit requirements. The bonds issued are a "special" obligation of CEDA, not encumbering CEDA, CALED, or the local municipality as the source of repayment of the bonds issued. Repayment is the obligation of the Applicant/Business Borrower, and will be secured by a bank letter of credit. CEDA will not undertake unsecured financings.
Local Control
If a project is in your jurisdiction, you have the
option of acting as the issuer, or utilizing CEDA, or other issuers. In
any case, CEDA will ask you to hold a public hearing on the issuance of
bonds for the project, giving full notice to policymakers and the public.
Since these projects generally provide a public benefit, it would be expected
that the issuance of bonds would be endorsed. However, if the item is
not approved, CEDA cannot issue the bonds.
FINANCING AVAILABLE NOW TO GROW MANUFACTURING BUSINESSES!!!!
Are you looking for:
- Timely and hassle-free access to expansion capital for land, building, or equipment?
- Long-term loans, with no prepayment penalty?
- 10% to 20% low down payment, preserves cash to promote business growth.
- Interest rates that are 20-30% below standard commercial lending rates?
Sample Project Comparison:
STEP 1
Review this Checklist to see if IDBs are
an option for your manufacturing expansion needs.
If you answer "YES" to these four key questions, proceed to
STEP 2.
- Is manufacturing or processing the primary business activity?
- The same information assembled to obtain the bank Letter of Credit can be used for the second mortgage loan review
- Credit review looks at repayment ability, loan to value, and standard industry ratios
- Can the company obtain a bank Letter of Credit to support
the IDB issue? (If the company qualifies for a conventional bank
loan, it should be able to qualify for a bank Letter of Credit.)
Additional Issues - Further considerations include: - Has the company expended any funds for project costs to date? Project costs incurred more than 60 days prior to beginning the IDB application process are not eligible to be paid with bond proceeds.
- Tax treatment: Depreciation of financed equipment or facilities must use the straight line method (no accelerated depreciation).
- Industrial Development Bond funded construction projects are subject to prevailing wage.
How do I lower my cash down payment?
CEDA has partnered with the Community Reinvestment Fund (CRF) to make long term, fixed rate, second mortgage business loans. CRF utilizes its own capital and the New Markets Tax Credit Program to make these loans. Once a project is pre-qualified for an IDB, we work to obtain approval and funding of the second mortgage. Features:
- Fixed-rate long-term amortized loan
- The same information assembled to obtain the bank Letter of Credit can be used for the second mortgage loan review
- Credit review looks at repayment ability, loan to value, and standard industry ratios
- Project soft costs can be included in the financing, provided they are supported by the project appraisal (loan:value).
STEP 3
What happens next?
As soon as a project is pre-qualified for
an IDB, the CEDA finance team led by Growth Capital Associates, will take
primary responsibility for the IDB issuance process. This is generally
concurrent with the bank credit approval process.
STEP 4
Who does what?
CEDA Finance Team
- Pre-screen for basic eligibility and qualifications
- Secure local and state agency approvals
- Coordinate bond issuance and loan approval
Business Borrower
- Obtain bank Letter of Credit
Paula Connors
Executive Director
550 Bercut Drive, Suite G
Sacramento, CA 95814
916-448-8252 Ext. 102
pconnors@caled.org
Wednesday, April 23, 2008; 9:30 a.m.
Click here to download meeting notice
Teleconference: (913) 227-1219
Conference call code 725241
