8C — May 29 - June 11, 2015 — Industrial / Distribution Centers — M id A tlantic
Real Estate Journal
www.marejournal.com
I ndustrial R eal E state & D istribution C enters
By Sam Macrina, MEDFAS Tax exempt bank loans cut your interest rate by 39%
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facturers, assisted living, multi-family, recycling com- panies, waste management and nonprofit entities can take advantage of TEF. How can a lender dis- count the interest rate by 35 to 39 percent? Tax-exempt financing is a federal allocation under Section 144 of the Internal Revenue Code. Using this tool can cut borrowing costs by 35 to 39 percent. Tax- exempt financing is used for the purpose of investing in new facilities, produc- tion lines, machinery and
equipment, and technological advancements that help bol- ster productivity and profit.
ing on to the borrower. Regional Pretzel Bak- ery saves $2.4 million by
tion facility potentially add- ing 4 new production lines. The new buildings where financed with a $6 million dollar tax exempt mortgage loan and the production line with a $2.6 million dollar tax exempt equipment loan. Initially, the bank offered an interest rate of 5% but since the bank did the loan as a tax exempt loan, the bakery paid an interest rate of 3.25%, saving $2.4 million dollars in interest expense. Hospital Central Ser- vices Corporation of Al- lentown Pennsylvania HCSC HCSC required substantial building upgrades to their 44 year old facility in Allentown, Pennsylvania. MEDFAS partnered with HCSC to secure financing using the benefits under section 144 of the Internal Revenue Code. Sam Macrina of MEDFAS said, “Often the difference between a conventional com- mercial bank loan and a tax-exempt bank loan can make or break an expansion project.” Steve Gergar , CFO of HCSC agrees, “Financing was a critical element in moving the project forward. By using a tax exempt bank loan we were able to save over $800,000 in financing costs, and the project would not have succeeded without them.” HCSC’s financing package included $6.5 million in a tax exempt bank loan for equip- ment and $1.5 million tax exempt real estate with a $2 million State incentive loan. At the national level, ap- proximately $85 Billion is available. The problem is almost no one knows how to navigate the complex appli- cation process to secure this financing. Macrina said “I routinely track companies that are expanding by reading press releases. 99 out of 100 com- panies do not use this benefit and leave $300,000 on the table for every $1 million borrowed or $3 million on the table for every $10 million borrowed.” SamMacrina is the pres- ident of Manufacturers Economic Development Financing Associates (MEDFAS) and has been in the banking industry for almost 40 years. n
ow to get your lender to reduce your interest rate
by 39%. T a x - E x - e m p t F i - nanc i ng – TEF, a fed- eral tax ex- emption tool that g i ves banks the ability to cut
“At the national level, approximately $85 Billion is available. The problem is almost no one knows how to navigate the complex application process to secure this financing.”
When utilizing TEF, a bank does not have to pay federal or state income taxes on the interest payments paid by the borrower to the lender. Since most lenders are in a 35 to 39 percent tax bracket, the lender can pass the sav-
using Tax Exempt Financ- ing Unique Pretzel Bakery was running 3 shifts and could not keep up with demand for its Unique Pretzels. Ag- gressively they added 70,000 s/f to the existing produc-
Sam Macrina
their interest rates by up to 39%, is a federally authorized development finance tool that helps stimulate public and private investment. Manu-
YOUR LOWEST COST OF CAPITAL Tax Exempt Bank loans cuts your interest rate by 35% to 39%
TAX-EXEMPT FINANCING MAY BE USED TO FUND THE FOLLOWING ASSETS:
Tax-Exempt Financing -TEF- is a federally- authorized development finance tool that helps stimulate public and private investment. Manufacturers, assisted living, multi-family, waste management, recycling and Non-Profit entities can take advantage of TEF. Tax-exempt financing is a federal allotment under Section 144 of the Internal Revenue Code, which can save borrowers nearly 35% on a loan through a bank. Tax-exempt financing is a broad term that also includes tax-exempt loans made by a bank or private lender to a private enterprise to finance the costs of capital projects. Tax-exempt financ- ing is used for the purpose of investing in new facilities, production lines, machinery and equipment, and technological advancements that help bolster productivity and profit. When utilizing this program, a bank does not have to pay taxes to the federal government and in turn, can pass these savings on to the borrower, with an average savings of 35% in interest expense alone.
medfas.com // smacrina@medfas.com // 610.763.2310 Contact Sam today to sign up for a FREE 15 minute online workshop.
Sam Macrina President of MEDFAS
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