Industrial Development Bond (IDB) Comparative Interest Rate Chart

IDBs issued to purchase land, buildings and new equipment are typically issued as tax-exempt weekly variable rate bonds that have averaged about 2.69% for the last 17 years, and the total average annual percentage rate (APR) a typical IDB project would be less then 4.2% (including an annual fee of about 1.5% of the outstanding principal balance is added to the IDB interest rate for a bank guarantee of repayment to the bond purchasers, (click here for more info on IDBs) that helps make the bonds marketable at such a low rate. 

A 12 week moving average line has been included to the tax-exempt trend line in the chart below to smooth out some of the short-term, wider fluctuations of the weekly variable IDB tax-exempt rate and provide a clearer picture of what the the average rate have been. 

Also included in the chart is the prime rate - the "standard" bank lending rate, but most businesses will be charged at least one percentage points in addition to this amount for commercial building financing.  Please note that bank loan terms will usually be 20 years maximum vs. 30-35 years with IDB financing. 

Taxable bonds can be used in conjunction with IDBs to increase the amount financed and/or cover ineligible costs or by themselves (with a bank Letter of Credit) to finance any business or non-profit capital purchase over $2 million dollars, without State or local government approval. 

In a Small Business Administration (SBA) 504 financing structure for the purchase of land and buildings, the 504 rate (which is only 40% of the project financing) is combined with a bank loan for 50% of the project costs, which is at Prime plus (usually 1 or more additional percentage points).  Click here to see the pros and cons of SBA 504 vs. IDB financing. 

IDBs have averaged 2.69% over the last 15 years - for an average APR of 4.19%.  Since commercial loans will usually be 2 points above prime, that is 4.58 points less than Prime plus 2 and 3.08 points less than the average SBA 504 rate (see the table in the chart below).  Since January 2009, IDB weekly variable rates averaged 0.52%. 

Click here to see more detail on the IDB tax-exempt rate trend for the last 2 years.

Contact Keith Sutton or Walter Vennemeyer for more IDB information.

Click here or on the image to download a PDF of the chart below, comparing these monthly financing rates over the last 17 years.