$100M Fund Targets Manufacturers

TRENTON-Manufacturing companies in New Jersey looking to buy new facilities or new equipment in the state can tap into $100 million in low-interest, tax-exempt bond financing. The New Jersey EDA is making that amount available to eligible companies through the end of the year.

"With lower interest rates and longer terms than are generally available from other sources, EDA bond financing can be an affordable tool to support the growth needs of New Jersey manufacturers," says Caren S. Franzini, the authority's CEO. "The tax-exempt bonds can offer a real cost savings for building acquisitions or renovations, or new equipment and machinery purchases costing anywhere from $750,000 to $10 million."

EDA has been authorized to issue the tax-exempt bonds under the federal IRS code to help "a wide range of manufacturing businesses," according to Franzini. "There is no financial exposure to the EDA or to the State of New Jersey."

Interest income earned by bond purchasers is exempt from both federal and state income taxes, with the savings passed along to borrowers in the form of a lower interest rate. Under the terms of the program, as outlined by EDA, bonds can be arranged at variable or fixed-interest rates for terms of up to 20 years. The amount of savings realized will depend on the bond structure and market conditions at the time of financing.

Under current market conditions, EDA is generally able to offer fixed interest rates ranging from 4% to 5%, authority officials say. The financial terms are subject to the approval of bond purchasers, and it's the responsibility of a borrower to secure a bank or other bond purchaser. EDA bond financing can also be used in conjunction with other forms of EDA assistance, according to Franzini.

According to data provided by EDA, 15 Garden State manufacturing companies arranged for more than $43 million in tax-exempt bond financing for their projects in 2005. Among the largest financings were the $3.95 million picked up by Capitol Ornamental Concrete Specialties to finance construction of a new building and equipment acquisition in South Amboy; the $4.3 million used by Genesis Land Holdings to acquire land, construct two buildings and buy equipment for DuBell Lumber Co. in Millville; and $3 million used by EMI Edge to buy and renovate a new building in Totowa for its manufacturing entity, ECI Technology. Commerce Bank, PNC Bank and Wachovia were the bond purchasers, respectively, in the three cases.