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Avoid Raising Taxes With Direct Lending
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Financing capital projects, such as equipment, infrastructure, facility, energy needs and unfunded pension obligations, can be complex and time consuming. Allow me to contrast the differences between direct lending and traditional bond financing.
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PROJECT FUNDING & CASH FLOW
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Direct Lending provides fixed and floating rate debt instruments to fund your projects. Additionally, your municipality can neutralize short-term cash flow gaps with a revolving line of credit.
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Bond Financing funds projects through fixed rate and floating rate structures. Short-term cash flow declines are funded with revenue anticipation notes.
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NO VOTER
APPROVAL
REQUIRED VS.
RAISING TAXES
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Direct Lending governmental activity loans are structured as capital leases, and the payments are subject to the municipality annually appropriating the payments to the lessor at a scheduled governing body meeting.
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Bond Financing in many states, for governmental activities, requires voter approval to raise taxes to pay the debt service on the bonds.
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Direct Lending involves the borrower and lender entering into a private placement loan agreement to fund new projects and/or refinance existing debt.
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Bond Financing requires the municipality to hire a team of finance professionals, including a rating agency to review the municipality s creditworthiness, a trustee to collect bond payments and pay bondholders, bond counsel to draft the debt agreements, an underwriter to buy the bonds, and a financial advisor to coordinate the process on behalf of the municipality.
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SIMPLICITY OF ISSUANCE & DOCUMENTATION
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Direct Lending contemplates the use of standardized documentation, which enables the funding of multiple loans under a comprehensive Master Financing Agreement (MFA).
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Bond Financing involves creating individual debt obligations, each memorialized with its own set of bond documents.
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INTEREST RATES & EARLY PAYOFF FLEXIBILITY
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Direct Lending interest rates are set based upon the financing term, borrowers creditworthiness, ability to pay off the loan early, and market interest rates for all debt instruments.
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Bond Financing interest rates are set on the day the bond is sold to the public and fixed for its entire term. The bond s total interest cost is calculated by analyzing each serial bond and term loan individual interest rates, the cost of issuance, and time value of money.
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Direct Lending accelerates the funding process to 30 days or less and allows the municipality s executive team and its legal counsel to work directly with the lender and its legal counsel.
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Bond Financing involves many more parties and various finance professionals, as stated above. It may take months to assemble a team, place the item on the ballot, and sell the bonds to an underwriter.
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INFRASTRUCTURE
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Energy Conservation Projects
Roads & Bridges
Pipelines
Street Light Systems
Water Treatment Plants
Renewable Energy Plants
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ENERGY
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Energy Performance Contracting
Renewable Energy
Central Plants
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EQUIPMENT
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911 Emergency Response Systems
Patrol Calls
Fire Trucks
Maritime Vessels
Public Safety Aircraft
Energy Management System
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FACILITIES
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Administrative Facilities
Fire Stations
Police Stations
Court Houses
Transportation Garages
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Have a project in mind? Explore your payments with our Loan Calculator.
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The Holman Capital Advantage
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Customized Financing Solutions
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SCHEDULE A VIRTUAL MEETING
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I would appreciate the opportunity to get on your calendar for a virtual meeting to introduce Holman Capital Corporation. Our brief Public Sector Lending Strategy presentation will provide an informative overview of our capabilities to deliver ideas and capital to your community. Please let me know your availability for a virtual call.
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Lance Holman
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In Case You Missed It
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GUIDANCE LINE OF CREDIT AND MASTER LEASE PURCHASE AGREEMENT FOR MUNICIPALITIES
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A Guidance Line of Credit and a Master Installment Purchase Agreement can simplify and expedite the acquisition of capital assets for your municipality.
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READ MORE
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MUNICIPAL PROJECTS AND THE COST OF WAITING
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The Design, Build, Finance Strategy provides a firm project cost, eliminates price increases, spares time and saves the municipality money.
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READ MORE
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GUIDANCE LINE OF CREDIT AND MASTER INSTALLMENT PURCHASE AGREEMENT FOR ENTERPRISE FUNDS
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A Guidance Line of Credit and a Master Installment Purchase Agreement can simplify and expedite the acquisition of capital assets for your municipality.
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READ MORE
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