1. Bank Loan vs Bond Issue Overview

2. Bank Loans vs. Bond Issues
Bank-Qualified Debt -- Certain Tax-Exempt Debt Obligations, Known as “Bank-Qualified Obligations” are attractive investments for banks. Bank-qualified Obligations are:
Issued by Local Government Units or Authorities that do not expect to issue more than $10,000,000 of tax-exempt debt in a calendar year.
Are not Private Activity Bonds, other than Qualified 501©(3) Bonds.

3. Bank Loans vs. Bond Issues
Banks that buy Non-Bank-Qualified Debt lose federal income tax interest cost deductibility for the interest expense on an amount of deposits corresponding to the amount of non-bank qualified debt purchased.
For Bank-Qualified Debt, banks lose interest cost deductibility on an amount of deposits equal to 20% of the amount of the tax-exempt obligations owned.

4. Bank Loans vs. Bond Issues
Advantages of Bank Loans to Tax-Exempt Borrowers
Lower Upfront Costs
Administrative Ease
No SEC Disclosure compliance requirements
Interest rates may be higher or lower depending on term, structure and market conditions

5. Bank Loans vs. Bond Issues
Advantages of Bond Issues to Tax-Exempt Borrowers
Often able to obtain longer term fixed interest rates
Longer term interest rates are often lower than bank loan rates

6. Bank Loans vs. Bond Issues
When Banks are most Competitive when compared to Bond Issues
When Bank-Qualified Debt is being offered.
In climbing interest rate environments. Generally, public market rates go up more quickly than bank rates.
When banks are willing to commit to fixed interest rates of 10 years or longer.
When banks are willing to cap variable interest rate exposure without substantial cost to borrower.