The Crawford County Industrial Development Authority (“CCIDA”) is a long-time client of Pepicelli, Youngs and Youngs PC. CCIDA was incorporated in 1969 under the Pennsylvania Industrial Development Authority Law. Attorney John Pepicelli was a founding director and served as legal counsel to CCIDA for many years. CCIDA has helped business, industry, and non-profits obtain low-interest loans to pay for new ventures or expanding operations for more than 50 years.
CCIDA issues loan approvals and authorization from the Pennsylvania Economic Development Financing Authority. Applicants must present new business plans or expansion plans to a large banking institution. If the banking institution agrees to issue a loan, the CCIDA can process the loan or bond issuance.
Tax Exempt Financing
Industrial manufacturing companies and non-profits (the “borrowers”) can obtain tax exempt financing through CCIDA with Pennsylvania Economic Development Financing Authority approval. A banking institution typically pays taxes on the interest income it receives. With tax exempt financing, the banking institution does not pay federal income tax on the interest and passes that savings on to the borrower. Manufacturers and non-profits use these savings to create jobs that benefit the local and regional economy.
For example: X Tool and Die Company wants to add a new production line. X needs $3 million to build an addition and purchase equipment. The Company applies to Z Bank for a loan. Z Bank offers a standard loan with 5.5% interest. X then seeks help from the CCIDA to obtain tax exempt approval. Once approved, Z Bank can offer the loan at a lower interest rate of 2.75%. This saves X more than $4,100 per month and more than $730,000 over the term of the loan.
CCIDA recently assisted in a tax exempt bond issue that exceeded $43 million; however, small projects as low as $500,000 are also welcome. The savings benefits of tax exempt loans become more significant as interest rates creep upwards. CCIDA is ready to assist industry and non-profits obtain these low-interest loans.
New Farmer Loans
CCIDA also assists aspiring farm owners through the Next Generation Farmer Loan Program. This program helps young farmers obtain up to $543,000 in loans for purchasing farm land and equipment. One advantage for older farmers is that these funds can be used by their children to buy the family farm. This protects the succession of family farms from one generation to the next.
Some restrictions apply because the loan proceeds cannot be used to purchase a house and no more than $62,500 can be used to purchase used equipment. The young farmer must obtain bank approval and cannot own a substantial amount of land prior to seeking financing.
CCIDA also assists with taxable bond issues for commercial and business loans. Interest rates for taxable bond issues are higher than tax exempt bond issues. But less stringent tax requirements also make the interest rates more competitive than standard commercial loans. Taxable bond issues may also result in fixed interest rates, rather than variable rates. That certainty helps businesses plan for the future.
Federal and state laws and regulations apply to all of these types of financing. Applicants should seek help from the Crawford County Industrial Development Authority before entering into purchase contracts for land or equipment. Contact Lisa Pepicelli Youngs or Brian T. Cagle, solicitors for CCIDA, to obtain more information.