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Tax-Exempt 501(c)(3) Revenue Bond ProgramVEDA’s Tax-Exempt 501(c)(3) Revenue Bond Program is designed to aid certain 501(c)(3) entities by VEDA’s issuance of tax-exempt bonds. In these projects, VEDA acts as a conduit issuer, thereby enabling eligible borrowers to access the tax-exempt bond market.
Because income earned by purchasers of these bonds is exempt from federal and, in some cases, state tax, these bonds traditionally carry lower interest rates and may carry longer terms than conventional bank loans.
Eligibility
- 501(c)(3) nonprofit organizations whose projects comply with certain Federal tax code provisions. Please contact VEDA Staff for additional information.
Use of Proceeds
- Fixed-asset projects (land, buildings, equipment) that further the tax-exempt mission of the 501(c)(3);
- Certain 501(c)(3) borrowers may be able to refinance debt and/or finance working capital used to support operations.
Bond Terms
- Payment terms and security requirements are negotiated between the borrower and the bond purchaser;
- The bonds may be sold through a public offering or privately placed with financial institutions (usually banks) or other institutional investors;
- The bonds are not guaranteed by the State of Vermont or VEDA; therefore, marketability of the bonds is based on the creditworthiness of the user company;
- Tax-exempt revenue bonds generally make sense for projects in excess of $750,000;
- Up to 2% of the bond proceeds may be used to pay for certain issuance fees and other closing costs;
- VEDA revenue bonds may be issued for a term of up to 120% of the useful life of the assets financed.
Fees
- Issuance fee is 0.50% of the bond face amount up to $25 million; 0.25% for issues greater than $25 million;
- Borrower is also responsible for bond and issuer counsel fees incurred in connection with the issuance of a bond.
Application Process
- All applications must be considered by the VEDA Board, which meets monthly for approval. This is a two-step procedure:
- Preliminary approval (inducement) must be obtained before any significant project expenditures are made;
- Final approval may be granted when applicant has received permits for the project and bond documents have been finalized.
- Applications may be downloaded or obtained at the VEDA office;
- Applicants are advised to discuss their proposed project with VEDA Staff prior to submitting an application.
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