5 Benefits of the 501 c3 Tax-Exempt Bond Program

The 501 c3 tax-exempt bond program allows charitable organizations to issue bonds in order to raise money for a particular project. As a charity, this program can provide several benefits that other methods of financing cannot. Here are some of the benefits of the 501 c3 tax-exempt bond program.

1. Lower-Cost Financing

One of the biggest benefits of this program is that it can provide low-cost financing for the charities that use it. When a charity issues this type of bond, it can do so at lower interest rates than what it would be able to borrow money for from a bank. This is because investors are interested in these loans because they do not have to pay taxes on the interest that they receive. This increases their effective return, which means that they will not have to have as high of a pre-tax return. This allows the charity to save a great deal of money and still get access to the money that it needs.

2. 100 Percent Project Financing

Another potential benefit of this program is that it can provide 100 percent financing for any project. When a business borrows money from a commercial lender, there is a good chance that the loan-to-value ratio will be much less than 100 percent. The lender has to require the borrower to come up with some of the money on its own. This makes it difficult for many charities because they do not have a lot of extra cash to use. With this program, they can simply issue bonds for the entire amount of money that they need. 

3. Long-Term Financing

With this program, many charities can also gain access to longer financing terms. With regular commercial lenders, they might get only a few years to pay back the debt. With a bond, they can get a much longer time to repay the loan. In many cases, these bonds can be set up to last for 20 or 30 years. This lowers the amount of money that the charity has to pay in interest every month.

4. Flexible Terms

Another big advantage for charities is that the bond program allows flexible terms. When you borrow money from a lender, you have to abide by its terms. When you issue a bond, you can decide exactly how and when you want to repay your debt. You even get to decide how much interest you want to pay. This gives you complete control over the situation and prevents you from having to meet someone else's standards.

5. Create Income

This type of bond program allows you to raise money to complete a specific project. Then, once the project is completed with the borrowed funds, you can use revenue that is generated from this project to repay the debt from the bonds. This means that you can keep your current budget intact and let the new project handle the new debt. 

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