Mississippi Small Enterprise Composite Program (SEC)

The Mississippi Business Finance Corporation's “MBFC” Small Enterprise Composite Bond Program “SEC” is designed in response to the American Recovery and Reinvestment Act of 2009, “the Stimulus Package”, to create jobs and promote economic development in the State of Mississippi. Under the Stimulus Package, banks may now purchase tax-exempt bonds issued by MBFC as bank qualified obligations. Now and through 2010, banks have the ability to purchase up to 2% of their net adjusted assets in this type of bank qualified, small issue tax-exempt obligations. Banks will be able to deduct 80% of the interest as tax-exempt income, resulting in higher yields for the bank. These higher yields should result in a lower interest cost to the borrower, when compared to traditional financing.

Additionally, through the issuance of bonds through MBFC, companies may be eligible for tax exemptions including sales tax abatements on qualified purchases, State income tax credits through the Mississippi Rural Economic Development Assistance Program (RED), and ad valorem exemptions, if approved by the appropriate city and county.

LOAN AMOUNTS AND TERMS

The maximum tax-exempt loan which a qualified applicant may borrow from MBFC for any project or projects is limited to four million dollars ($4,000,000) and the minimum is four hundred thousand dollars ($400,000).

The interest rate on the bonds may be variable or fixed through maturity or for a determined period of time.  The bonds will be amortized over a period not to exceed twenty (20) years.  The exact rate, terms and collateral shall be negotiated between the bank and the borrower.

Cost of issuance of the bond issue, including bond counsel fees and other common fees, may be paid from the proceeds of the bond issue or may be paid via an equity contribution from the borrower.  The cost of issuance is approximately 2% of the loan amount.

ELIGIBILITY

If the project is located within the 49 counties designated under the Gulf Opportunity Act of 2005 (GO Zone), most commercial businesses are eligible.

If the project is located outside the GO Zone, only manufacturers and processors are eligible.

The company must commit to create a minimum of ten (10) net new full-time jobs.

USE OF PROCEEDS

Loan proceeds may be used for fixed-asset financing, including land, buildings, and machinery and equipment. No used equipment may be financed with loan proceeds.

Expenditures made before inducement by MBFC typically cannot be included in the bond financing. A company whose funding needs do not coincide with the timing of a bond issue may use its own funds or obtain interim financing to begin the project. At the time of issuance, bond proceeds may be used to reimburse the company or to repay the interim loan. Companies considering participating in the SEC Program should have their project induced as early as possible.

TYPICAL PROCESS

Financing projects with Revenue Bonds in Mississippi is a relatively simple and quick process, normally requiring about three months from start to delivery date.  The following steps are involved in a typical tax-exempt bond issue. 

• The project is presented to the MBFC Board of Directors for consideration of an inducement resolution.
  
  
• A qualified company must submit three copies of a completed application and a non-refundable $500 application fee to MBFC.
  
  
• Each application must be accompanied by a written commitment from a Qualified Bond Purchaser.
  
  
• MBFC staff will review applications on the basis of completeness, program guidelines, financial soundness of the company, and state and federal law eligibility.
  
  
• In accordance with the Internal revenue Code, local public hearings must be held before bonds are issued.
  
  
• At the bond closing, company representatives will execute all required documents.