Port Authority Reaches Out to Fund Smaller Projects
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You're in the market to finance construction, land and building acquisition, facility improvements or maybe major capital equipment. You'd like to look at funding sources other than just your bank. Consider talking with the Cleveland-Cuyahoga County Port Authority's Development Finance Group. The Development Finance Group, is an independent lender, with some very attractive rates and terms, for not only just the big box deals, but also for small businesses seeking financing of $1 million or more for fixed assets for their business.
The funding source comes primarily from bond financing, using a triple B rating to float the bonds. By virtue of the tax exempt status that the port authority is chartered with, it can also pass the tax breaks along to you. The tax exemption does not, however, cover the state sales tax. As an independent lender, the Development Finance Group employs investment bankers to conduct the underwriting and then to raise and place the debt in the open capital market.
Highlights of their programs include:
Fixed - Rate Financing Program - This program would be for small businesses who wish to borrow money at investment grade rates versus traditional bank financing for fixed assets including construction and permanent financing of the project. Financing requested should be between $1 million to $6 million. Your project's total transaction size, however, may not exceed $20 million when combined with other financing sources. This form of "structured" or "piggy-back" financing, once reserved for primarily big business, is becoming increasing popular for small business. The long-term fixed interest rates are for up to 25 years with level payments through out the term of the loan.
Off-Balance Sheet Financing & Leasing Program - This financing vehicle is designed for both for-profit companies and non-profit organizations wanting to have a new building or plant expansion but do not want the asset to appear on the balance sheet. This financing program allows the port authority to own the facility and lease it back to the company. At the end of the initial lease, you can choose to extend the lease, purchase the asset or vacate the property. The terms include 100% financing, with no limits, for three types of leases including financed, operating and synthetic leases. The rates are fixed or variable up to 20 years with tax savings on construction materials used in the construction phase of the project. The owner can also take the depreciation on the taxes and, at the end of the lease, own the building. The financing can improve your balance sheet, avoids restrictive banking covenants and you retain control of the construction and occupancy of your building.
Infrastructure Financing Program - This program is probably the most visible program as it is used by developers, cities and other regional organization and gets most media attention. Small businesses should tap into this program also with the right project because the incentives are extremely attractive. There is no equity required for this 100% financed, long-term 30-year fixed, tax-exempt rate financing. The interest is capitalized. Uses of the financing includes public infrastructure projects like roads, underground utilities, sidewalks, street lights, landscaping and public parking garages. The debt is secured by using a tax increment financing or special assessments as the revenue stream to pay for the public improvements. Of the three programs, this program may be hardest to access the funding, but the incentives are clearly worth the initial effort.
Expect between forty-five to ninety days to secure the funding, which falls in line with traditional bank financing, the SBA or Ohio Department of Ohio financing plans. Interest rates are comparable to banks, but many times, at terms better than banks. By charter, this group can provide statewide lending so if your business is in multiple locations you only need to work with one source. Most businesses can access this program, except retail, unless the retail business is buying a building and can handle a 20 year financing package. The charges you will incur are generally the legal fees and placement of debt fees to secure the debt and placement the debt.
The Development Finance Authority, whose goal is to enhance public-private partnerships to assist in job creation and community redevelopment, was created in 1993 and has assisted northeast Ohio businesses obtaining financing for community projects totaling more than $1.4 billion. The Cleveland-Cuyahoga County Port Authority has cooperative agreements with Geauga, Lake, Lorain, Ashtabula and Summit counties.
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About the author: Marsha Powers is president and CEO of Powers Financial Group Inc., which specializes in helping companies secure financing for business loans, commercial real estate, mergers and acquisitions, restructuring debt and consulting services. www.powersfinancial-group.com
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