What are Tax-Exempt Bonds?
Tax-exempt, industrial revenue bond programs are attractive financing options for small manufacturers looking to expand operations and upgrade facilities. Tax-exempt bonds are debt securities issued by a state or local government development agency on behalf of a private business. Once issued, tax-exempt bonds are sold in the open market or purchased by investors or financial institutions. Interest income earned by the bond purchaser is exempt from state and local taxes, which allows the lender to pass savings to the borrower in the form of lower interest rates. Tax-exempt bonds are similar to conventional loans. Bonds are not grants. Borrowers have to pay back the bond’s principal plus interest to the bond. Applicants have to demonstrate a strong business plan and project proposal, creditworthiness and strong financial statements. In addition, borrowers have to demonstrate how proposed projects will create jobs and positively impact the local economy. Unlike conventional loans, tax-ex
