Through a federally authorized program, the NJEDA issues conduit tax-exempt private activity bonds, the proceeds of which are used to provide financing.
Taxable bonds are also available for a wide variety of businesses, such as manufacturing, commercial, warehouse, and distribution, etc. Taxable bonds offer similar flexibility in structuring rates and terms but are not subject to the restrictions placed on tax-exempt financing under the IRC.
Bonds are sold via direct purchase or public offering. A financial intermediary, typically a bank, will directly purchase bonds from the NJEDA once it has performed a credit review on the applicant’s project. The bank sets the interest rate, terms and other financial details. In a public offering, bonds are purchased by an underwriter and sold to private investors in the public marketplace and may be structured with a bank’s commitment to provide a letter of credit (LOC) or a municipal bond insurance policy. Market conditions will determine the interest rate, while the bond’s terms and other financial details are set by the LOC provider