Small Business

Florida Development Finance Corporation (“FDFC”) is a state authorized issuer of

industrial revenue bonds. FDFC issues bonds in counties throughout Florida through interlocal agreements.

FDFC offers tax-exempt, low interest bond financing to qualified, financially sound, manufacturing and 501(c)(3) non-profit organizations. This program was designed to improve low cost capital availability to Florida’s manufacturers and non profit companies that qualify for tax exempt finance under IRS rules. In addition to manufacturers, 501(c)(3) organizations that have been financed with FDFC issued industrial revenue bonds include, charter and private schools, homes for the aged, daycare facilities, and recreation centers. The bonds financed items, such as, broadcasting equipment and office facilities.

If a transaction does not meet IRS qualifying rules for tax exempt finance, it can be financed with taxable bonds through FDFC. For taxable transactions, IRS qualifying rules governing tax exempt financing do not apply. The rates for taxable bond transactions are very competitive compared to other financing instruments, such as conventional loans. To find out if your project might qualify for tax exempt or taxable bond financing through FDFC, please contact the FDFC staff and review the Frequently Asked Questions (FAQ) for more information below.

 

FREQUENTLY ASKED QUESTIONS (FAQ)

  1. What is an industrial revenue bond (IRB)?
    Industrial Revenue Bonds are issued by a government entity to assist a financially viable, private company for its venture. The entity’s goal in providing the debt securities is to improve the economic and employment conditions of its region. IRBs can be taxable or tax exempt bonds and interest rates can be fixed or variable.
  2. How do you determine whether a company is eligible for tax-exempt financing through IRB?
    Under IRS regulations, tax exempt finance is usually classified as 1) Governmental, or 2) Private Activity. A private activity bond must be “qualified” to be tax exempt, and the qualification rules are restrictive. Two key groups that are eligible for private activity bonds are small manufacturers and 501(c)(3) non-profit corporations. Manufacturers are not automatically qualified for tax-exempt finance, for they also must fall within several other restrictive standards that require an evaluation of the project and the capital assets being financed. Because rules, regulations and historical case law are extensive and can affect eligibility, we leave final decision to the attorneys, and case by case eligibility is usually determined by bond counsel for an issuing entity after review of all the factors.
  3. What is the application process?
    If the project is eligible for IRB financing, the client or bank can request an application from FDFC and then submit the completed application along with the application fee. For more information, please contact FDFC.
  4. What role does FDFC play in the process?
    FDFC will conduct all public hearings in the appropriate jurisdictions and work with all parties involved; bank, borrower and legal counsel to ensure the project meets the criteria and that all paperwork is completed correctly and in an orderly fashion. Please note the FDFC is not a direct issuer or lender of funds but a conduit issuer. A conduit issuer does not directly assume the risk for the project. The risk is usually assumed by a credit provider, such as a bank. FDFC acts as a conduit issuer and issues tax-exempt bonds as long as the project meets the tax-exempt criteria. Tax exempt eligibility is usually determined by bond counsel for an issuing entity after review of all the factors
  5. What is the importance of a bank in the process?
    The bank’s role is VERY important in the process. If the bonds are not being directly placed to a private entity, a bank will need to issue a letter of credit. The bank’s letter of credit provides credit enhancement for the bonds, effectively guaranteeing that bond holders will be repaid. This, in turn, lowers the borrowing costs to the client. Without a direct placement of the bonds or a bank’s letter of credit, it would very difficult for a borrower to receive the necessary financial backing for their venture.
  6. What are some of the limits associated with tax-exempt IRBs?
    Bonds can be issued as stand-alone transactions or pooled transactions. Typically, stand-alone bond transaction amounts are at least $1,000,000 so that front-end bond finance costs are financially viable for the borrower.The tax-exempt bond issuance limit for manufacturing facilities is $10,000,000 for a given geography. There is a total $20 million capital investment test that must be met (including the project being financed). This is a limit on capital expenditures, in the same city, township or incorporated municipality for a six year period starting three years before the proposed issue date of the bonds and three years after (based upon projected capital expenses) the proposed issue date of the bonds. There is a $40 million limitation per borrower and related party on capital expenditures, whether pursuant to a financing or through direct expenditure, anywhere in the U.S. or its territories.No more than 5% of the bond proceeds can be used for bond issuance and related costs for manufacturing projects (there is a 2% limitation on issuance costs with the balance available for credit enhancements costs). For 501(c)(3) projects, only 2% of bond proceeds can be used for issuance costs. If a borrower is financing acquisition of existing building and capital assets, 15% of acquisition cost must be spent to rehabilitate the assets.
  7. What are some of the fees generally associated with IRBs?
    • FDFC Issuance fee
    • Issuer and Bond Counsel fee
    • Bank Counsel fee
    • Company Counsel fee
    • Underwriter fee
    • Remarketing fee
    • Trustee Fee