BONDS VS DIRECT LENDING

Avoid Raising Taxes with Direct Lending

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.

Bond Financing
vs
Direct Lending
May Require Voter Approval
Bonds Backed by a Tax Rate Increase Typically Require Voter Approval
No Voter Approval Required
No Tax Rate Increase Necessary
Early Payoff Lockout Period
30 Year Bond – No Prepayment Allowed Typically Years 1-10
Early Payoff Allowed
Borrower Allowed to Payoff Debt on Any Scheduled Payment Date
Competitive Interest Rates
Fixed and Variable Rate Options
Rates Based Upon Movement of Treasury Yields
Competitive Interest Rates
Fixed and Variable Rate Options
Rates Based Upon Movement of Treasury Yields
Interest Rate Set on the Day of Funding
Borrower Does Not Know the Interest Rate Until the Day the Bonds are Sold to Investors
Borrower Assumes Interest Rate Risk
30-45 Day Rate Lock
Interest Rate Held Firm to Provide the Municipality Time For Governing Body Approval
Lender Assumes Interest Rate Risk
Hire Team of Finance Professionals
Rating Agency
Bond Insurer
Trustee
Investment Bank
Financial Advisor
Annual Disclosure Requirements
Bond Legal Counsel
Use Your Internal Finance Team
Executive Team
Legal Counsel
Submit Audited Financial Statements Annually
High Fees
Cost of Issuance Increases with Deal Size
Low Fees
One Low Fee Regardless of Deal Size
Bond Financing Agreement
Long Document
Time Consuming
Create Separate Agreements for Each Financing
Master Financing Agreement
Streamlined Document
Create Multiple Loans Under One Agreement
Reduced Administrative Time
Financings Up To 30 Years
Finance Assets Up to Its Economic Useful Life
Financings Up To 30 Years
Finance Assets Up to Its Economic Useful Life
Longer Funding Cycle
Establish Bond Campaign
Place Bond Measure on the Ballot
Await Election Day
Voters Decide on Tax Increase to Pay For Bonds
Quick Funding
Fund in 30 – 45 Days

WHAT WE FINANCE

infrastructure
  • Roads & Bridges
  • Pipelines
  • Street Light Systems
  • Water Treatment Plants
  • Renewable Energy Plants
Energy
  • Energy Performance
  • Contracting
  • Renewable Energy
  • Central Plants
Equipment
  • 911 Emergency Response Systems
  • Patrol Calls
  • Fire Trucks
  • Maritime Vessels
  • Public Safety Aircraft
  • Energy Management System
FACILITIES
  • Administrative Facilities
  • School Facilities
  • Fire Stations
  • Police Stations
  • Court Houses
  • Transportation Garages

As your trusted capital planning partner, please contact me to help you customize a direct lending financing solution to serve your needs now and in the future.

Lance S. Holman
PRESIDENT, CEO
949-981-0237
Lance.Holman@HolmanCapital.com

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