Login or signup
36
LEGAL ISSUES

Industrial Revenue Bonds
 

Tax-exempt industrial revenue bonds provide the best financing rates in years.
Advertisement

Manufacturers, take note. If you're giving any thought to expanding or modernizing your facilities, the best financing rates in years can be found through tax-exempt industrial revenue bonds (IRBs). In recent months, in fact, small manufacturing companies have been able to raise 10-year money for as low as 7%, says Bob Wolforth, a vice-president at Merrill Lynch's Princeton, N.J., office. That's at least 1% less than what you'd pay for ordinary long-term debt -- assuming you could even get it. And if that's not low enough for you, it's also possible to sell tax-exempt bonds at floating rates that adjust weekly or monthly; currently, floating rates are 2% to 3% below fixed rates.

Congress changed the eligibility requirements for IRBs in 1986, banning their use for purposes like fast-food outlets, and earmarking them for manufacturers. Under the rules, municipalities and states must authorize the issuance of bonds, and states must now stay within volume ceilings for all types of tax-exempt financing (although many states don't reach their limits).

Most companies issuing IRBs raise at least $1 million, but sometimes businesses raise as little as $500,000, says Kevin McCarty of the Council of Industrial Bond Issuers, in Washington, D.C. To make IRBs more accessible and less costly to small businesses, Ohio, California, and a few other states put together pools of small issues. The paperwork and legal cost of doing IRBs can still be considerable (usually 2% to 3% of the financing amount); but that may be a small price to pay for long-term, fixed-rate money.

To find out whether IRBs are available in your area, contact your state or local industrial-development authority. -- Bruce G. Posner

Last updated: Aug 1, 1992




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Comment and share features
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: