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Pennsylvania and the Berwick region offer many incentives to give businesses and their employees the financial assistance they need to succeed in today’s economy.
BIDA has found a program administered by the Pennsylvania Economic Development Financing Authority (PEDFA) to be particularly helpful.
PEDFA
Objectives and General Information
The purpose of the Pennsylvania Economic Development Financing Authority (PEDFA) is to provide access to low-interest financing to businesses. PEDFA finances business projects by issuing both tax-free and taxable bonds, selling them to investors and lending the proceeds to eligible businesses. PEDFA finances several projects at one time in a composite bond. In this way, the fixed costs of issuing the bonds are spread over more projects.
The application should include a local bank's letter of intent to guarantee the loan. This financial guarantee is used to assure that PEDFA bonds are highly rated, attractive to investors and have the lowest possible interest cost for the borrower.
Tax Exempt Program Guidelines
Eligibility
Eligible projects are manufacturing, exempt facilities, non-profit 501(c)(3) facilities and multi-family housing facilities. Allowable costs include land (acquisition, site preparation, legal and other costs), building (acquisition, construction, rehabilitation and other related costs), equipment (acquisition, delivery, installation and renovation), refunding of outstanding tax-exempt debt as allowed by federal law, and closing costs (no more than 2 percent of the tax-exempt financing amount).
The minimum loan size for a manufacturing project is $400,000 and the maximum is $10,000,000. Non-profit entities and exempt facilities are not subject to a loan ceiling.
Job creation and/or preservation are an essential part of a project. Manufacturing projects are required to add one permanent, full-time job for each $50,000 of tax-exempt financing within three years of the financing. All other tax-exempt and taxable projects must create and/or retain at least 10 permanent, full-time jobs per financing within three years of the financing.
Interest Rate and Term of Loan
For composite pool projects, loan terms are up to 30 years, subject to negotiation and approval of the borrower’s letter of credit provider. Current rates for the variable loans are available upon request.
For stand-alone projects, interest rates can be variable or fixed and are determined by the underwriter or bank.
Fees
A nonrefundable fee of $500 is required at the time of the project application and is used to pay PEDFA’s expenses associated with each project. The fee will be credited against closing costs.
For composite pool projects, the PEDFA program carries annual credit enhancement, remarketing and trustee fees currently totaling approximately 0.685%.
For stand-alone projects, the Beneficial Owner/Developer should generally expect to receive annual servicing bills from the trustee, the letter of credit bank (if applicable), and the remarketing agent (if applicable). These annual fees are negotiated by the Beneficial Owner/Developer with each entity.
Closing costs for composite pool projects average 2.5 percent of the PEDFA loan amount. That estimate does not include fees charged by the Beneficial Owner/Developer’s counsel, participating bank or bank counsel. For stand-alone projects, closing fees depend on the various entities involved in the financing.
BIDA charges a fee of .2% or $1,500, whichever is higher.
Conventional Bond Program Guidelines
Eligibility
All business projects, other than certain residential units, are eligible for conventional bond financing.
Eligible costs include land (acquisition, site preparation, legal and other costs), building (acquisition, construction, rehabilitation and other related costs), equipment (acquisition, delivery, installation and renovation), refunding of outstanding tax-exempt debt as allowed by federal law, and closing costs (no more than 2 percent of the tax-exempt financing amount).
Loan terms are up to 30 years, subject to negotiation and approval of the borrower’s letter of credit provider. The interest rate is variable for composite pool projects and can be variable or fixed for stand-alone projects.
Fees
A nonrefundable fee of $500 is required at the time of the project application and is used to pay PEDFA’s expenses associated with each project. The fee will be credited against closing costs.
For composite pool projects, the PEDFA program carries annual credit enhancement, remarketing and trustee fees currently totaling approximately 0.685%.
For stand-alone projects, the Beneficial Owner/Developer should generally expect to receive annual servicing bills from the trustee, the letter of credit bank (if applicable), and the remarketing agent (if applicable). These annual fees are negotiated by the Beneficial Owner/Developer with each entity.
Closing costs for composite pool projects average 2.5 percent of the PEDFA loan amount. That estimate does not include fees charged by the Beneficial Owner/Developer’s counsel, participating bank or bank counsel. For stand-alone projects, closing fees depend on the various entities involved in the financing.
BIDA charges a fee of .2% or $1,500, whichever is higher.
For more information, visit NewPA.com's page on the PEDFA program.
More Funding Opportunities
The following are some of the other popular funding programs aimed at helping grow businesses in our region:
Customized Job Training (CJT)
This state grant program reimburses Pennsylvania employers up to 75 percent of the eligible costs for job creation, retention and upgrade training. CJT funds can be used for instructional costs, supplies, consumable materials, contracted services and relevant travel costs for local education agency project coordinators.
Job Creation Tax Credits (JCTC)
This state program offers employers a $1,000 tax credit per full-time job, per year. A business may claim credits only after a job has been created. Jobs must be created within three years from the start date and all tax credits must be claimed within five years from receipt of the tax credit certificate. To be counted as new full-time employees under the JCTC program, new employees must earn an average hourly rate of at least 150% of the federal minimum wage, excluding benefits.
Keystone Opportunity Zones (KOZ)
Eligible businesses that move into a KOZ are exempt from paying a variety of state and local taxes including local real estate taxes and gross receipts taxes, as well as Pennsylvania 's capital stock and franchise tax and corporate net income tax, for several years. Under a state law approved in 2008, KOZ status on unoccupied parcels on all current zones may be extended for seven years from the expiration date of the zones; if companies occupy a parcel before December 31, 2015, they may receive KOZ benefits for 10 years.
Local Economic Revitalization Tax Assistance Act (LERTA)
Several municipalities, school districts and counties in Penn's Northeast offer real estate tax abatements on improvements for certain commercial and industrial projects. Some of these communities offer 100% abatements for ten years. Others tie their abatements to the cost of construction (i.e. one year of abatement for every $1 million of construction). Still others offer graduated abatements for up to 10 years. Contact the economic development organizations that serve the counties in which you have interest to learn where the LERTA program is active.
Machinery and Equipment Loan Fund (MELF)
Low-interest loan financing to acquire and install new or used machinery and equipment or to upgrade existing machinery and equipment. Maximum MELF loan is $5,000,000 or 50% of the total eligible project cost, whichever is less. MELF term is up to 10 years, depending on the useful life of the machinery being financed. Borrower must create or retain one full-time job for every $25,000 borrowed. The project must be directly related to the business process.
Opportunity Grant Program (OGP)
This Pennsylvania Department of Community and Economic Development (DCED) program provides grants to firms or industrial development corporations and municipalities on behalf of firms that create or preserve a substantial number of jobs in the state. Grant funds can be used for a variety of standard business expenses including job training, land and building improvements, the purchase of machinery and equipment and working capital. A company that receives an Opportunity Grant Program award must, within three years, meet certain job creation requirements. The company's new hires must receive a base pay of at least 150% of the federal minimum wage, excluding benefits, in order to be counted toward the employment requirement.
Pennsylvania Industrial Development Authority (PIDA)
PIDA provides low-interest loan financing through industrial development corporations for land and building acquisition, construction and renovation, resulting in the creation or retention of jobs. PIDA rates can be as low as 4% interest. Loan term is up to 15 years on land and buildings.
PIDA will give loans up to $2 million (within Enterprise Zones, Act 47 Industrial Communities, brownfield sites and Keystone Opportunity Zones, $2.25 million), with no more than 30 percent to 70 percent of total eligible project costs, based on firm size and unemployment rate.
A company that benefits from a PIDA loan must create one full-time job for every $35,000 borrowed. Eligible companies include manufacturers, distributors, most other industrial companies, computer or clerical operation centers, research and development facilities and office buildings used as national or regional headquarters. Retail and most commercial businesses are ineligible.
Small Business First (SBF)
Funding for small businesses, including low-interest loan financing for land and building acquisition and construction; machinery and equipment purchases and working capital. Maximum loan amount is $200,000 or 50 percent of total eligible project costs, whichever is less. Interest rate is fixed for the entire term, typically at 4%. Terms are as follows: up to 15-year term for land and building, up to 10 years for machinery and equipment and up to three years for working capital. One full-time job must be created or retained for every $25,000 borrowed.
Workforce & Economic Development Network of PA (WEDnetPA)
WEDnetPA’s alliance of 14 state system universities, 14 community colleges and other educational providers acts as the delivery mechanism for Pennsylvania’s Guaranteed Free Training (GFT) program. Qualified companies can receive basic skills training (up to $450 per trainee and $75,000 per company) and information technology training (up to $700 per trainee and $50,000 per company) through this innovative state program. For more information, visit www.wednetpa.com/about.
WorkForce Investment Act of 1998 (Title 1, Subtitle B)
A federal program that provides job training to eligible individuals. Through an On-the-Job-Training (OJT) component, companies can be reimbursed for up to 50% of wages paid to eligible trainees during the training period. The amount of time included in the training period varies with the difficulty of the job, which is usually determined through the assessment of skill levels found in the Dictionary of Occupational Titles. Program eligible employees include, but are not limited to, those who are economically disadvantaged and those who have been dislocated due to a plant closing or mass lay-off. Local Workforce Investment Boards determine the amount of grant funding to be awarded to eligible companies.
For more detailed information on state business incentive and economic development programs available, visit NewPA.com's Funding & Program Finder.
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