Introduced in 1992, the Texas Leverage Fund (TLF) provides an additional source of financing to communities that have adopted an economic development sales tax. Communities may leverage future sales tax revenues to support job retention or creation.
Available for interim, long-term or gap financing, TLF loans provide flexible financing terms to match the unique needs of communities, with maturities of up to 15 years available. Generally, EDCs are eligible to borrow four to five times annual sales tax revenues, up to $5 million. TLF loans are low-cost, providing capital to communities at floating Prime Rate, as published in the Wall Street Journal.
Future sales tax revenues serve as collateral for loan repayment with required debt service coverage ratios specified in the Texas Leverage Fund Program Guidelines. Pledged tax collections not needed for actual debt service are available for other projects.
Use of Proceeds
Loan proceeds must be used to pay eligible "costs" of "projects" as defined by the Development Corporation Act of 1979 (the Act), as amended. Under Section 4A of the Act, examples of eligible costs include land, buildings, machinery and equipment for manufacturing and industrial operations. Under Section 4B of the Act, examples of eligible costs include sports, athletic, entertainment and public park purposes and events.
Texas Comptroller Tax Publications (96-302) – Economic Development Sales Tax Development Corporation Act
Capital loans for product commercialization and businesses
The Texas Product/Business Fund provides asset back financing to companies currently doing business in the state. Financing is done in the form of direct asset based loans with a variable interest rate tied to London Interbank Offered Rate (LIBOR). Loans can be amortized up to the life of the asset.
Texas companies or out-of-state/international companies doing business in the state are eligible to apply. Applicants can submit a free brief pre-assessment in order to check eligibility.
Attributes of the Texas Product Fund:
• Asset Based Loans
• Competitive Loan-To-Value (LTV)
• Positive EBITDA not required
• Secure Loans with Property Plant & Equipment (PP&E)
Click the link above to download a detailed overview and a pre-assessment submittal form for the Texas Product/Business Fund.
The State of Texas Industrial Revenue Bond Program (IRB) is designed to provide tax-exempt or taxable financing for eligible industrial or manufacturing projects as defined in the Development Corporation Act of 1979 (Act). The Act allows cities, counties, conservation and reclamation districts to form non-profit industrial development corporations (IDCs) or authorities on their behalf. The purpose is to provide bonds for projects within their jurisdictions.
The IDC acts as a conduit through which monies are channeled. Generally, bond debt service is paid by the business under the terms of a lease, sale or loan agreement. As such, it does not constitute a debt or obligation of the governmental unit, the IDC or the State of Texas.
The IDC issuing the bonds must pass a declaration of official intent resolution (tax-exempt only); a bond resolution approving the project; set the bond amount; and make findings required by state law. In addition, the governmental unit of the IDC must pass a resolution that approves the corporate resolution and the project. All terms of the bond sale are negotiated among the appropriate parties and documents are prepared by legal counsel.
The IDC submits an application to the Economic Development and Tourism Division of the Governor's Office (OOGEDT) and the Office of the Attorney General simultaneously. However, the Attorney General will not give final approval until they receive an approval letter from the OOGEDT. Once all approvals have been granted, the IDC can issue the bonds and finance the project from the proceeds.
For additional information on a Loan Assistance Program, please contact us at (512) 936-0100.