Industrial Development Bond (IDB) Comparative Interest Rate Chart

IDBs have averaged about 2.5% over the last 16 years - see the table in the chart below for the current 16 year average, highs and lows of prime, SBA 504 and Taxable bonds as well as IDB tax-exempt rates.  Since January 2009, IDB weekly variable rates have averaged 0.42%. 

IDBs up to $20 million can be issued on behalf of a business to purchase land, buildings and new equipment and are typically issued as tax-exempt weekly variable rate bonds, though equipment only bonds are sold for a fixed rate.  IDBs have the option of converting variable rate bonds to fixed rates, but that option has not been utilized in the past.

The total average annual percentage rate (APR) of a typical IDB project would be about 4.09%, which includes an annual bank Letter of Credit (LOC) fee of about 1.5% of the outstanding principal balance that is added to the IDB interest rate for the LOC bank guarantee of repayment to the bond purchasers.

This IDB APR has averaged 4.54 points less than the typical commercial loan rate that is usually 2 points above prime (which has averaged 6.63% over the last 16 years), so prime plus 2 would 8.63%.

Click here for more info on IDBs to understand why the bonds are 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 or two 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 2 additional percentage points.  Click here to see the pros and cons of SBA 504 vs. IDB financing. 

Click here to see more detail on the IDB tax-exempt rate trend for the last 4 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 16 years.