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501(c)(3) Revenue Bond Financing

Perhaps you need to purchase or construct a new facility, improve or refinance an existing facility, or acquire new equipment. You may not realize it, but as a not-for-profit organization you can finance your expenditures on a tax-exempt basis and receive substantial savings through the use of tax-exempt 501(c)(3) Bonds.

How 501 (c)(3) Bonds Work

A governmental authority acts as the issuer of the bonds, passing its tax-exempt status on to your organization. Because the interest on the bonds is not subject to federal income taxes, investors and lenders require a lower interest rate to achieve an equivalent after-tax return. Therefore, you receive a preferential interest rate, generating substantial savings for your organization.


Many organizations are not aware of 501(c)(3) Bonds or how easy it is to use this method of financing today. Not-for-profit groups who want to construct or furnish a new or existing facility should consider these bonds. For the financing to be tax-exempt, there are a few guidelines that must be followed:

  • The borrower must be designated a 501(c)(3) corporation under the federal tax code.
  • Funds can be used to build a new facility or purchase an existing facility, acquire necessary land, and purchase equipment.
  • In some cases, funds may also be used to refinance existing conventional debt that was originally used for capital expenditures.
  • All bond financed expenditures must be consistent with the organization's 501(c)(3) purpose. 
  • An initial resolution must be passed by the governmental issuer prior to finds being expended on the project.

First American Advantages and Benefits

We offer a wide range of experience in financing both Public and Private Placement Tax Exempt Bonds, and the ability to provide you with the following benefits:

  • Competitive Rates
    A 501(c)(3) Bond is exempt from some federal taxes, making it an attractive investment for the bondholder. The interest rate available on such bonds is far lower than conventional financing, and you can expect your interest savings to range from 20% to 30% or more. We are able to offer you competitive rates within this range, whether you are interested in a variable rate loan or a fixed rate loan.
  • Flexible Packaging
    With First American, you can package your loan to include other bank services which are available at more favorable terms to significant borrowers.
  • Accurate Assessment of Your Needs
    We'll do more than help you determine whether or not you're qualified for a Bond. Even if you are qualified, a 501(c)(3) Bond may not be your best option. With our experience with many different loan options, we can compute the difference between a Bond, a commercial mortgage, and more. We'll assess your needs and issues, then help you determine which option is best for you.
  • Smooth Process
    There are many parties involved in a Bond transaction, and it can take from 45 to 120 days to complete. That's why you need a financial institution with the knowledge and experience to manage costs and make the process run as efficiently as possible. With our contacts within the Tax Exempt community, we can assemble a team of specialists who have a thorough understanding of all the legal and financial aspects of a transaction. We will work closely with you every step of the way - answering your questions, helping you avoid pitfalls, and making sure you get the financing that's right for you.
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