If you’re expanding or relocating a capital-intensive operation and will be investing in facilities, machinery and equipment or technology, your financing needs can be considerable. The MCPED’s Business Development staff is prepared to help you sort through your options to identify the right financing vehicles for you. The primary sources for fixed asset financing are conventional loans, Industrial Development Revenue Bonds, and SBA loans.

Industrial Development Revenue Bonds

Industrial Development Revenue Bonds (IDRB) are an additional method of financing your business expansion or relocation project. If you are a manufacturer whose projected investment in fixed assets will be $2 million or more (up to $10 million in any one community), the IDRB offers you below-market-rate financing with an interest rate that is typically two to three percent below conventional financing rates.

The tax-exempt IDRBs, such as those issued through the Macomb County Economic Development Corporation, have tax-exempt status because a governmental authority issues them. Their status, as such, means that the purchasers of the bonds pay no federal income tax on the interest that they receive associated with their investment.

The process for securing IDRB financing requires the business owner to secure support for the issuance of the bonds from an authorized governmental entity: the Macomb County EDC. A bank or other financial institution must issue a Letter of Credit, guaranteeing the EDC that the principal and interest on the bonds will be paid when due. The bonds, upon issuance, are then sold to investors. The proceeds from their sale are used to finance the project. The business owner, as the borrower, is responsible for the principal and interest on the debt.

IDRB proceeds may be used for a variety of purposes:

• Construction of a new facility
• Expansion of an existing facility
• Acquisition of an existing manufacturing facility
• Purchase of new machinery and equipment
• Purchase of land (up to 25 percent of the bond value)

Small Business Administration

For business development financing (fixed assets: building, machinery, equipment, technology) that does not reach the $2 million investment threshold recommended for Industrial Development Revenue Bonds, the Small Business Administration offers several options that may be appropriate for your business expansion or relocation project. Their primary program for fixed asset financing is the SBA 504 Loan:

The SBA 504 Loan Program provides small businesses with long-term fixed rate financing for the acquisition or construction of fixed assets. Projects are financed through a public/private partnership that involves private lenders financing 50 percent of project costs, a certified development corporation (CDC) acting on behalf of the SBA, financing 40 percent of the costs and the small business investing a minimum of 10 percent.