Municipal Finance

Tax-exempt bond financing is financing that offers your organization lower interest rates then banks can offer. 501 (c) (3) organizations are permitted to access tax-exempt bonds. Lower interest rates are issued through tax-exempt bonds because interest earned by bondholders is exempt from Federal, and in most cases, State and local income tax. This tax savings is passed along to the borrower in the form of a lower interest rate.

501 (c ) (3) organizations seeking tax-exempt bond financing have a number of bond options and bond “working group” participants to choose from. Western Solutions will help your organization select experienced bond participants as well as explain in detail bond options available. We will educate your team to prepare your organization for the bond process.

Tax-Exempt Variable Rate Demand Bonds (VRDBs)

Tax-Exempt Variable Rate Demand Bonds are municipal bonds that offer the lowest cost of capital to non-profit borrowers. Schools and Universities seeking VRDBs are able to obtain all inclusive financing for rates under 5% and in some cases as low as 2%. VRDBs can provide up to 30 years amortization and can be structured to include interest-only periods and capitalized interest periods.

Bond Financing Options

·         Adjustable Interest Rate VRBDs require a Letter of Credit, have no pre-payment penalties and the rate adjusts weekly. Adjustable rate bonds are less expensive that fixed rate bonds.

·         Fixed Interest Rate VRDB’s require a Letter of Credit and are fixed through a SWAP. Fixed rate financing has a higher cost of capital then an adjustable interest rate, however, the borrower has the security of a set monthly payment.

·         Bank Qualified Debt is similar to conventional financing. The bank does not have to pay federal taxes on the earning from Bank Qualified Debt and that savings is passed to the borrower in the form of a lower interest rate.