New Bond Financing Program
We are very pleased to announce the start of a new financing program from Pennsylvania Rural Water and PRWA Financial Services. For the first time, members of the Association will be able to come together in the form of a bond pool to share closing costs and underwriting expenses for needed system projects.
This is important for several reasons. Smaller systems and smaller financing needs are now eligible for bond financing. Typically, financing needs under $5 million dollars wouldn’t find much benefit in the bond market because of the high legal and underwriting costs associated with the closing. Now, because we can share these costs through the pool, smaller deals can gain all the advantages that financing has to offer.
Probably the biggest advantage to bond financing is the 30 year amortization period. Bank financing typically runs at a maximum length of 20 or 25 years. The additional 5 or 10 years offered through bonds can make a big difference to cash flow and the rates that need to be charged to customers. Another advantage to bonds is the fixed interest rate for the entire 30 year term of the financing. For managers who want the security of a known payment and expense throughout the entire term of the financing, this is of great comfort. A fixed rate through the entire 30 year term also doesn’t put any risk into the rates systems have to charge customers to cover the cost of the capital project.
Although systems come together to share costs, each borrower in the pool maintains its independence through the term of the bond. Each borrower will be underwritten separately, have its own set of individual closing documents, and make payments individually. So our members get the best of both worlds. You are offered the opportunity to come together like a large buying group, while maintaining complete ownership of your project, your outcomes, and your system.
PRWA Financial Services has a team of experts ready to sit down with you and discuss your financing needs. As a member of the Association, you have access to experts in the field that will analyze your borrowing need and make some recommendations that you might find valuable in your decision making process. We are very excited to add this option for our members along with our existing loan and lease program. We now have all the tools to help systems of any size and as always, help you save money and keep rates as low as possible in the process.
Joseph Falcone and Bub Bullock are the PRWA Financial Services team members with the understanding and experience to help you with the Bond program details. They are eager to help you and your system. For more information please contact Bud below or request information here.