Financing

Bond Guaranty Programs

The Bond Guaranty Program of the Arkansas Economic Development Commission was created to provide long-term, tax-exempt and taxable financing for businesses expanding or locating in Arkansas. Although the city or county may issue the revenue bond, the company is still responsible for paying the principal and interest. Under this program, the Commission "guarantees" timely payment of principal and interest, up to $5 million principal per bond issue, to the bondholders. This guaranty gives the bonds a better rating, thereby making the bonds more attractive to investors and reducing the company's cost to borrow money.

The Bond Guaranty Program complements the existing Act 9 Program by giving the bonds market strength for applicants that do not possess market-rated debt of investment grade quality. Additionally, the applicant must demonstrate to the Commission that the project provides substantial additional employment opportunities to Arkansans as a direct result of the project.

For businesses that have a financial history but are unable to sell industrial revenue bonds to the public, the Arkansas Economic Development Commission can assure bondholders of repayment by guaranteeing up to $5 million of the bond issue. The state's guaranty allows the bonds to be sold at a higher credit rating, therefore lowering the effective interest rate for the business. The Commission charges a 5% fee for guaranteeing issues of this type.

The Arkansas Development Finance Authority (ADFA) also provides a bond guaranty program that enables a company to obtain competitive, fixed interest rates. The total amount ADFA can guarantee is up to $6 million per borrower; therefore, a business could obtain up to $11 million per project, combining the programs of ADFA and the Economic Development Commission. ADFA has the capacity to issue bonds for a single project or for several projects on a pooled basis. The pooled or composite issue allows small businesses needing financing for fixed assets to take advantage of low interest financing and to share the costs for issuing bonds, an option which gives more financing opportunities which otherwise would not be available.

ADFA can also provide short-term financing to a company before bond proceeds are available.