Loans

Tax-Exempt Industrial Revenue Bonds are designed to provide tax-exempt financing to finance land and depreciable property for eligible industrial or manufacturing projects.  Under Title XIII of Revenue Reconcilliaiton Act of 1993 and the Development Corporation Act of 1979, Local Industrial Development Corporations (IDC's) can issue tax exempt bonds and the IDC acts as a conduit for the financing.   Project costs eligible include the acquisition of land and existing facilities; construction of new facilities; purchase of machinery, tools, equipment; and bond issuance costs in limited amounts. Only costs that have been incurred aafter the execution  of an inducement resolution by the IDC can be recovered through bond issuance.  The IDC acts as a conduit through which monies are provided.  Bond debt service is often paid by the business under the terms of a lease, sale or loan agreement and a bond issue does not constitute a debt or obligation of the governmental unit, the IDC or the State of Texas.  The maximum bond amount is $10,000,000; howevwer, the actual amount may be lower since the bond amount and certain capital expenditures made by the business within the issuer's jurisdiction for three years back and three years forward cannot exceed $10,000,000.  

These issues must receive a reservation under the State’s volume limitation (“volume cap”) managed by the  Texas Bond Review Board and must receive approval from the Texas Department of Economic Development and and also by the Attorney General's Office.  Projects must be located within the boundaries of the sponsoring issuer and governmental unit unless the IDC is requested to issue bonds by another governmental unit.   All three Counties in the Katy Area have IDC's.  The terms may be fixed or variable, less than prime, and amortized over the userful life of the assets being financed.                     

The Tax Reform Act of 1986 imposes a volume ceiling on the aggregate principal amount of “private activity bonds” that may be issued with the State during any calendar year.  Generally, the reservation of state ceiling issues is allocated by lottery in October each program year.  For more information on the “volume cap” or the lottery dates, contact the  at Texas Bond Review Board at 512-463-1741.

The Office of the Governor Economic Development and Tourism Division hereby gives notice that The Texas Small Business Industrial Corporation is accepting applications for loans to be funded through the Texas Industry Development Revolving Loan Program.   The Texas Industry Development Revolving Loan Program, provides capital to Texas communities and eligible 501© 3 corporations at favorable market rates.  The program supports eligible tax exempt public purpose projects that stimulate economic development within the community.  The loans are available with low cost, variable rate long term financing with the term of the loan not extending beyond the useful life of the assets and up to bond maturity in 2025.  Eligible projects must meet the project definition as described in the Development Corporation Act of 1979, the Texas Industry Development Program Guidelines and all appropriate state and federal regulations as applicable to the program.  Examples of public projects include:  public facilities; community infrastructure (i.e. water, wastewater, drainage, streets); remediation on public land/facilities, and public transportation.  Loan terms are available for participants with a credit rating of an A or above not to exceed December 2025.  A project must be found to be required or suitable for the promotion of economic development as deemed by the Corporation’s board of directors in the performance of its public purposes, functions and duties.  A project will not be eligible for funding under the program for moving existing jobs from one municipality or county in Texas to another municipality or county within the state.

The Small Business Administration (SBA) 504 Loan Program is a fixed asset financing program which offers small businesses long-term loans at a fixed rate of interest which is generally lower than market rates.  The program is designed to provide expansion capital to small businesses and stir investment in local economies resulting in job creation.  The loan may be used to acquire land, construct buildings, purchase land, buildings, machinery, and equipment.  The 504 loan is coordinated between the SBA and a private lender with the lender covering 50% of the project, the SBA percent, and the borrower 10 percent.  The maximum participation by the SBA is $1 million.

The Small Business Administration (SBA) 7(a) Loan Guaranty Program can provide assistance to businesses to obtain financing working capital and fixed asset purchases.  The 7(a) Pro guarantees commercial lending Institutions up to 80% for loans under $100,000 and up to a certain % for loans over this amount and up to $750,000.  Funds can be used to finance working capital, fixed asset acquisition, including land, buildings, and equipment.

The Texas Capital Fund Real Estate Development Program is designed to provide financial resources to non-entitlement communities. Funds must be used for real estate development (acquisitions, construction and/or rehabilitation) to assist a business, which commits to create and/or retain permanent jobs, primarily for low and moderate-income persons. This program encourages business development and expansions located in non-entitlement communities. The minimum award is $50,000 and the maximum is $750,000. The award may not exceed fifty percent (50%) of the total project cost.  Funds are provided with no interest accruing and with payments based on a 20-year amortization schedule. Total Texas Capital Fund participation from both Infrastructure program and Real Estate Development program may not exceed $750,000.

The Texas Small Business Fund provides financing to foster and stimulate the development of small businesses in Texas. Preference for funding will be given to “Growth Stage” companies in the state’s defined industry clusters within emerging technology fields including semiconductors; nanotechnology; biotechnology and biomedicine; renewable energy; agriculture and aerospace.  Preference will be given to small businesses that have received financing from the state’s Small Business Development Centers (SBDC) or through the Small Business Innovative Research program (SBIR).  Benefits of the Texas Small Business Fund:   supports Texas businesses; helps small companies succeed; and increases accessibility to other state programs.  The Fund is a revolving loan program with capital provided from $20 million in taxable bonds issued in 2005. The Office of the Governor, Texas Economic Development Bank administers the Fund at the direction of the Governor’s appointed nine member board.

The Texas Product Development Fund provides financing to aid in the development, production and commercialization of new or improved products within the state. Products appropriate for the Fund are inventions, devices, techniques, or processes  that have advanced beyond the theoretical stage and are ready for immediate commercial application. Preference for funding will be given to the state’s defined industry clusters within emerging technology fields including semiconductors; nanotechnology; biotechnology and biomedicine; renewable energy; agriculture and aerospace. Job creation and job retention within Texas will be considered within funding priorities. The Fund is a revolving loan program with capital provided from $25 million in taxablebonds issued in 2005. The Office of the Governor, Texas Economic Development Bank administers the Fund at the direction of the Governor’s appointed nine member board.

The purpose of the IRP program is to alleviate poverty and increase economic activity and employment in rural communities. Under the IRP program, loans are provided to local organizations (intermediaries) for the establishment of revolving loan funds. These revolving loan funds are used to assist with financing business and economic development activity to create or retain jobs in disadvantaged and remote communities. Intermediaries are encouraged to work in concert with State and regional strategies, and in partnership with other public and private organizations that can provide complimentary resources.  An intermediary, like an EDC, may borrow up to $2 million under its first financing and up to $1 million at a time thereafter. Total aggregate debt is capped at $15 million. In recent years, loans to intermediaries have been capped at $750,000. Ultimate recipients may borrow up to $250,000.  The following entities are generally eligible to apply for loans from intermediary lenders provided they owe no delinquent debt to the Federal Government: individual citizens or individuals who have been legally admitted to the U.S.; those located in a rural area defined as an area with a population of 25,000 or less, an entity that is able to incur debt, give security, and repay the loan; a corporation, partnership, LLC, individual, non-profit corporation or public body.

IRP funding may be used for a number of purposes but to be eligible, ultimate recipients must be located in a rural area. Under the IRP, a rural area is any area that is not inside a city with a population of 25,000 or more according to the latest decennial census. Some examples of eligible projects are: the acquisition, construction, conversion, enlargement, or repair of a business or business facility, particularly when jobs will be created or retained; the purchase or development of land (easements, rights of way, buildings, facilities, leases, materials); to purchase equipment, leasehold improvements, machinery, and supplies; start up costs and working capital; pollution control and abatement; transportation services; feasibility studies; hotels, motels, B&Bs, and convention centers.  Most parts of the Katy Area are eligible for USDA Business Programs.  Contact Katy Area EDC for USDA eligibility maps. 

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The Linked Deposit Program was established to encourage lending to historically underutilized businesses, child care providers, non-profit corporations, and/or small or medium-sized businesses located in an Enterprise Zone. Use of proceeds may include working capital or the purchase, construction, or lease of capital assets, which include land, buildings and equipment. Loans to start-up businesses are permissible, subject to the lender's normal credit evaluation.

Loans are subject to the lender's normal credit evaluation. Minimum loan amount is $10,000; maximum loan amount is $250,000 with the loan term for no more than the useful life of the financed asset. Participating lenders pay a lower interest rate on the linked deposit received from the State.

The Low Doc program was designed to simplify the SBA application process and shorten the processing time for smaller loans.  To be eligible, a business must have 100 or fewer employees, and annual sales for the past 3 years must be less than $5 million.  This program allows for an SBA guarantee of up to 80% for loans up to $100,00, and up to 75% for loans between $100,000 and $150,000.

The Comptroller of Public Accounts and the Texas Treasury Safekeeping Trust Company is responsible  for administering the new Texas CAPCO program. The program is funded by “Insurance Premium Tax Credits”.   In essence, the CAPCO program is designed to encourage growth of businesses, create jobs and generate additional state tax revenues. The primary difference between a traditional venture capital investment and a state supported CAPCO structure is in the type and location of the businesses (the portfolio companies). As a method to encourage and retain high paying jobs and industries in Texas, the law requires CAPCOs to invest 30% of their capital in “strategically located” and 50% in “early stage” businesses.  

In 2002, the total taxable premiums attributable to 1,381 licensed insurers and HMO’s in the state was over $49.3 billion. Texas’ tax revenue on those premiums was almost $773.5 million. Over the course of the next 10 years (without considering growth in premiums or tax rates) Texas should collect almost $8 billion in insurance premium tax. Tax credits under the CAPCO program may not be utilized until 2009 at the maximum rate of 25% of earned credits per year.   How the program works:  Beginning in January 2005, venture capital companies may make application (with a mandatory non-refundable fee of $7,500) to the Comptroller to become certified as a CAPCO.  Within 120 days of rule adoption (estimated to occur sometime in April, 2005) CAPCOs submit a request for an allocation of the total $200MM in available premium tax credits. These tax credits can only be used to offset future insurance premium taxes beginning in 2009 at the rate of 25% per year.  Insurance companies must commit to invest money in the CAPCOs up to the amount of their specific allocation.  CAPCO’s then repay the insurance company investors over time with a combination of earnings on their investments and future tax credits.  The CAPCOs earn the tax credits by investing in certain targeted Texas businesses.