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 less then 3% for the last 15 years.  Approximately 1.35% of the outstanding principal for the bank Letter of Credit (click here for more info on IDBs) is added to that for an average annual percentage rate of less than 4.25% for the typical IDB project financing. 

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.  The bank loan terms will also 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 2.84% since 1993 - that is 4.16 points less than Prime and 4.58 points less than the average SBA 504 rate.  In the last month, IDB weekly variable rates averaged 1.4%  Click here to see the IDB tax-exempt rate trend for the last 2 years.

Contact Keith Sutton or Walter Vennemeyer for more IDB information.

Click here to download a PDF chart (like the one below) comparing these monthly financing rates since 1993