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Mid Atlantic Real Estate Journal — Industrial / Distribution Centers — May 29 - June 11, 2015 — 19C
Industrial Real Estate & Distribution Centers
By Sam Macrina, MEDFAS
H
ow to get your
lender to reduce
your interest rate
by 39%.
Tax-Exempt Financing –
TEF, a federal tax exemption tool
that gives
banks the
ability to cut Sam Macrina
their interest rates by up to
39%, is a federally authorized
development finance tool that
helps stimulate public and
private investment. Manufacturers, assisted living,
multi-family, recycling companies, waste management
and nonprofit entities can
take advantage of TEF.
How can a lender discount the interest rate by
35 to 39 percent?
Tax-exempt financing is
a federal allocation under
Section 144 of the Internal
Revenue Code. Using this
tool can cut borrowing costs
by 35 to 39 percent. Taxexempt financing is used for
the purpose of investing in
new facilities, production
lines, machinery and equipment, and technological advancements that help bolster productivity and profit.
When utilizing TEF, a bank
does not have to pay federal
or state income taxes on the
interest payments paid by
the borrower to the lender.
Since most lenders are in a
35 to 39 percent tax bracket,
the lender can pass the saving on to the borrower.
Regional Pretzel Bakery saves $2.4 million
by using Tax Exempt Financing
Unique Pretzel Bakery was
running 3 shifts and could
not keep up with demand
for its Unique Pretzels. Aggressively they added 70,000
s/f to the existing production facility potentially adding 4 new production lines.
The new buildings where
financed with a $6 million
dollar tax exempt mortgage
loan and the production line
with a $2.6 million dollar
tax exempt equipment loan.
Initially, the bank offered an
interest rate of 5% but since
the bank did the loan as a tax
exempt loan, the bakery paid
an interest rate of 3.25%,
saving $2.4 million dollars
in interest expense.
Hospital Central Ser-
Tax exempt bank loans cut
your interest rate by 39%
vices Corporation of Allentown Pennsylvania
HCSC
HCSC required substantial
building upgrades to their 44
year old facility in Allentown,
Pennsylvania. MEDFAS
partnered with HCSC to
secure financing using the
benefits under section 144 of
the Internal Revenue Code.
Sam Macrina of MEDFAS
said, “Often the difference
between a conventional commercial bank loan and a
tax-exempt bank loan can
make or break an expansion
project.”
Steve Gergar, CFO of
HCSC agrees, “Financing
was a critical element in
included $6.5 million in a tax
exempt bank loan for equipment and $1.5 million tax
“At the national level, approximately $85 Billion is available.
The problem is almost no one knows how to navigate the
complex application process to secure this financing.”
moving the project forward.
By using a tax exempt bank
loan we were able to save
over $800,000 in financing
costs, and the project would
not have succeeded without
them.”
HCSC’s financing package
exempt real estate with a $2
million State incentive loan.
At the national level, approximately $85 Billion is
available. The problem is
almost no one knows how to
navigate the complex application process to secure this
financing.
Macrina said “I routinely
track companies that are
expanding by reading press
releases. 99 out of 100 companies do not use this benefit
and leave $300,000 on the
table for every $1 million
borrowed or $3 million on the
table for every $10 million
borrowed.”
Sam Macrina is the president of Manufacturers
Economic Development
Financing Associates
(MEDFAS) and has been
in the banking industry
for almost 40 years. n
YOUR LOWEST COST
OF CAPITAL
Tax Exempt Bank loans cuts your interest rate by 35% to 39%
Tax-Exempt Financing -TEF- is a federallyauthorized development finance tool that
helps stimulate public and private investment.
Manufacturers, assisted living, multi-family, waste
management, recycling and Non-Profit entities can
take advantage of TEF.
TAX-EXEMPT FINANCING MAY BE
USED TO FUND THE FOLLOWING ASSETS:
Tax-exempt financing is a federal allotment
under Section 144 of the Internal Revenue
Code, which can save borrowers nearly 35%
on a loan through a bank. Tax-exempt
financing is a broad term that also includes
tax-exempt loans made by a bank or private
lender to a private enterprise to finance the
costs of capital projects. Tax-exempt financing is used for the purpose of investing in new
facilities, production lines, machinery and
equipment, and technological advancements
that help bolster productivity and profit. When
utilizing this program, a bank does not have to
pay taxes to the federal government and in
turn, can pass these savings on to the
borrower, with an average savings of 35%
in interest expense alone.
Contact Sam today to sign up for a
FREE 15 minute online workshop.
medfas.com // [email protected] // 610.763.2310
Sam Macrina
President of MEDFAS