The creation of Nimble: Small Issuance Bond Program (“Nimble”) will enable New York City Capital Resource Corporation (“CRC") to offer tax-exempt industrial development bonds as an alternative to traditional bank loans to finance manufacturing equipment and real estate projects. 

Tax-exempt debt offers benefits that can include a lower interest rate, a longer term and a reduced equity contribution.  Despite these advantages, the added costs of issuing bonds limits the cost effectiveness of this product to issuances under a certain size, while the maximum remains capped under Federal law at $10 million. 

Nimble addresses the minimum size challenge by reducing transaction costs to allow smaller projects and companies access to the tax exempt bond market through CRC, a conduit issuer. 

The program is designed to provide cost effective tax-exempt financing for smaller projects, including equipment only needs in the $2 million to $5 million range.  However, the program is available for any qualifying manufacturing or industrial financing from $1 million to $10 million for eligible borrowers to finance projects that entail: only equipment purchases; equipment and the acquisition and/or improvements of real property; or only the acquisition and/or improvement of real property.

Recent changes in Federal law make this an opportune time for small manufacturers to take advantage of tax-exempt bond financing.   The American Reinvestment and Recovery Act of 2009 ("ARRA") introduced several major changes in tax exempt bond law that companies seeking financing and commercial banks seeking to lend can take advantage of (note that certain changes expire in 2011):

• Expanded eligibility for small companies in the new media, biotechnology, pharmaceutical and related areas to finance capital asset acquisition on a tax-exempt basis. Until 2011, bonds may be issued to finance facilities that are used in the creation or production of intangible property, including patents, copyrights, formulas, processes, designs and other similar items.  Previously, the law restricted the facilities to those used for the creation or production of tangible property. 
• Greater flexibility for small manufacturers to finance projects related to their core manufacturing operations, such as the construction of a loading dock, warehouse facility or parking facility on the site of their manufacturing facility.  Until 2011, 100% of bond proceeds may be used to finance assets that are "ancillary assets," which are assets other than "core manufacturing assets."  This change in law allows companies to finance any assets that are "functionally related and subordinate to" its core manufacturing assets, as long as they are located on the same site. Previously the law allowed not more that 25% of such ancillary assets to be financed with tax-exempt bond proceeds.  
• Before 2011, companies will be able to finance office space that is ancillary to the manufacturing operations and is located on the same site without limitation.  Commencing in 2011, office space that is ancillary to the manufacturing operations and is located on the same site may be financed with Bond proceeds, provided that the cost of such office space, together with the cost of other ancillary assets financed with bond proceeds, does not exceed 25% of the total financed asset costs.
• In order to stimulate the purchase by commercial banks of tax-exempt bonds, ARRA has relaxed restrictions applicable to commercial banks with respect to the deductibility of interest expenses incurred by banks in order to acquire or carry such bonds.

All Nimble bonds are purchased directly by qualified lenders, primarily commercial banks. Borrowers are responsible for identifying a lender who will participate in the program and purchase the bonds on terms that are acceptable to all involved parties. 

The Nimble program eliminates the need and cost of credit enhancement such as letters of credit, and the need for a number of the bond professionals required for a public offering, such as bond trustees and paying agents, placement agents and underwriters.   

The programs mission is three-fold; (1) Leverage Stimulus Act changes to certain bond issuance requirements to spur product use, (2) Increase cost effectiveness of  Manufacturing Bonds; and (3) More closely align bond product to financing needs of emerging industries and businesses.

Please refer to the Nimble Fact Sheet (PDF) for a printer-friendly description of this program.

As part of the initial application, a tax questionnaire is included to help determine eligibility under federal IRS requirements governing the issuance of Nimble bonds, a type of Private Activity Bond.  In addition, a cost-benefit analysis will be conducted to ensure that the proposed project creates a positive economic return for the City through increased tax revenue and that it reinforces key policy initiatives and goals of the City.

Please note that companies may not use accelerated depreciation on bond-financed assets.

From application to issuance, the Nimble process should take about 60 to 90 days to complete.  Steps taken during this time generally include:

• Bank and Borrower negotiate loan terms
• Prospective applicant calls CRC to discuss its project
• Applicant submits a Public Hearing Information Form
• Applicant submits a completed application to CRC and completes tax due diligence questionnaire. (The application and additional information may be requested in conjunction with the public notice form to assist in determining eligibility.)
• Preliminary review of eligibility commences
• TEFRA public hearing and notification to the Mayor
• Loan and bond document preparation
• Final approval
• Closing

A number of the above steps may take place concurrently.

CRC/NYCEDC: 212-312-3794, nyccrc@nycedc.com