Lending for Governmental & 501(c)3 Organizations

A lending option that can provide lower rates and a longer term for capital projects for qualifying organizations.

Tax Exempt Financing

Tax exempt financing may provide a lower interest rate option for community and municipal organizations such as hospitals, schools, higher education, community associations, and state and local governments. Qualifying organizations may use this financing option to complete capital projects such as building construction, land acquisition, renovations or equipment purchases in addition to other purposes.

We have a team of dedicated lending professionals to help you understand how tax exempt bond financing may help your organization.

Frequently Asked Questions

  • Tax-exempt financing can be very beneficial to the right organization, but it is a complex process. A local, TowneBank commercial banker can help you review the benefits of tax-exempt financing and compare it to other options before you make a decision. 

  • Tax-exempt financing is a financial tool available to governmental and non-profit organizations for capital purposes (including refinancing debt originally used for capital purposes). ‘Tax-exempt’ means that the interest of the bond debt service payments is exempt from federal and sometimes state and local income taxes for the bond holder, making the interest rate lower.

    It is important to note that there are IRS restrictions that prohibit using tax-exempt financing for operating cash flow.  

  • State and local governments have traditionally issued tax-exempt bonds for school construction, public infrastructure, and municipal utilities. However, certain 501(c)3 organizations can also take advantage of tax-exempt bonds such as nonprofit senior living facilities, schools, and certain healthcare facilities. In order to abide by the separation of church and state, projects for religious organizations where 'indoctrination' activities take place do not qualify for tax-exempt financing. 

    Your TowneBank commercial banker can help you explore the options for your organization.

  • Historically, tax-exempt debt has been less expensive than a traditional taxable option and, in some cases can provide a longer term.

Normal credit approval criteria apply.

Comments regarding tax implications are informational only. TowneBank and its representatives do not provide tax or legal advice. Please consult your individual tax or legal professional before taking any action that may have tax or legal consequences.

banking for nonprofits

Banking for NonProfits

You support our communities and we work to support your mission with banking services designed specifically for non-profit organizations.
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