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Industrial Revenue Bond Financing

Perhaps you need to purchase or construct a new facility, improve or refinance an existing facility, or acquire new equipment. You may not realize it, but you can finance your expenditures on a tax-exempt basis and receive substantial savings through the use of tax-exempt industrial revenue bonds.

How Industrial Revenue Bonds (IRBs) Work

A governmental authority acts as the issuer of the bonds, passing its tax-exempt status on to your company. Because the interest on the bonds is not subject to federal income taxes, investors and lenders require a lower interest rate to achieve an equivalent after-tax return. Therefore, you receive a preferential interest rate, generating substantial savings for your company.


Many companies are not aware of IRBs or how easy it is to use this method of financing today. Small and mid-sized businesses who want to construct or furnish a manufacturing facility should consider these bonds. For the financing to be tax-exempt, there are a few guidelines that must be followed:

  • Funds must be used by a manufacturer of tangible goods. The company must add value or alter raw materials.
  • At least 75% of the bond proceeds must be used for expenditures directly related to the manufacturing process. No more than 25% may be used for ancillary facilities such as warehouse or office space.
  • Funds can be used to build a manufacturing plant and acquire necessary land.
  • Funds can be used to acquire an existing manufacturing plant as long as 15% or more is used to rehab the structure.
  • Funds can be used to acquire new equipment used in the manufacturing process.
  • Your company's capital expenditures cannot be greater than $20 million (except with a lease) in the municipality where the project is located. This $20 million is the amount spent over a defined six-year period: 3 years before financing and 3 years after.
  • Funds expended prior to receiving initial approval from the governmental issuer may not be eligible.

First American Advantages and Benefits

We offer a wide range of experience in financing both Public and Private Placement Industrial Revenue Bonds, and the ability to provide you with the following benefits:

  • Competitive Rates
      -An Industrial Revenue Bond is exempt from some federal taxes, making it an attractive investment for the bondholder. The interest rate available on these bonds is far lower than conventional financing, and you can expect your interest savings to range from 20% to 30% or more. First American Bank can offer you competitive rates within this range, whether you are interested in a variable rate loan or a fixed rate loan.
  • Flexible Packaging
      -With First American, you can package your loan to include other bank services which are available at more favorable terms to significant borrowers.
  • Accurate Assessment of Your Needs
      -We'll do more than help you determine whether or not you're qualified for an IRB. Even if you are qualified, an IRB may not be your best option. With our experience with many different loan options, we can compute the difference between an IRB, a commercial mortgage, an SBA 504 loan, and more. We'll assess your needs and issues, then help you determine which option is best for you.
  • Smooth Process
      -There are many parties involved in an IRB transaction, and it can take from 45 to 120 days to complete. That's why you need a financial institution with the knowledge and experience to manage costs and make the process run as efficiently as possible. With our contacts within the IRB community, we can assemble a team of IRB specialists who have a thorough understanding of all the legal and financial aspects of this type of transaction. We'll work closely with you every step of the way -- answering your questions, helping you avoid pitfalls, and making sure you get the IRB that's right for you.

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