Department Of Commerce

Stand-Alone Bond Financings

The Authority typically issues bonds on a stand-alone basis. "Stand-alone" refers to the fact that the transaction is structured for one borrower at a time. Stand-alone bond issues can be structured with fixed or variable interest rates and with or without credit enhancement and/or ratings.

Bond issues can be sold with or without a rating from one or more of the three primary rating services. When it is not cost effective to secure a rating, or when a rating is not available, the Authority may issue non-rated bonds.

The Authority's stand-alone financing programs can be completed using several different methods of sale. For large projects, a public offering of bonds is the most commonly used option. For smaller projects, the private placement of bonds is the most common approach.

Public Sale

A negotiated public sale of bonds is appropriate for sales of complex financing structures, large issue size, variable rate bonds, those with programs or financial techniques that are new to investors, or is offered under volatile market conditions. To complete a negotiated issue, a managing underwriter, approved by the Authority, is selected to work with other members of the financing team to establish contractual terms, obtain credit ratings and cost effective enhancement, and structure a repayment schedule for the issue. The managing underwriter tests the interest rates and bond structure in the bond marketplace during the marketing of the bonds.

Private Placement

A private placement is considered for issues in which a public sale is either too expensive, such as a smaller dollar volume, or likely to be ineffective, such as a borrower with a complicated history that requires direct contact with investors. To complete a private placement, the financing team structures the financing, develops a credit package, then drafts documents, which are distributed to the interested investors. Either a private placement agent is appointed to work on the transaction or, if requested by the borrower, the Authority will consider directly placing the bonds with a specified investor. The borrower, with the assistance of a placement agent or the Authority, negotiates the lowest interest cost and covenant requirements. Recent federal legislation revised laws that allow local community banks to purchase bonds at favorable rates.

Loan Process

The Stand-Alone Program requires the borrower to send correspondence to the Authority describing the project and requesting an application. Once the application is completed, the staff will present it to the Authority Board for approval.

Master Loan Program

The Master Loan Program enables qualified borrowers to access the tax-exempt capital markets at investment-grade interest rates. Documents are standardized and bonds can be marketed for more than one borrower at a time, reducing the costs of issuance for each.

Program Structure

  • Loans tailored to meet the borrower's current and future capital financing needs
  • Credit support provided by the Montana Board of Investments results in a lower interest rate
  • Terms of up to 20 years
  • Bonds marketed for a single borrower or a group of borrowers with each borrower responsible only for its own series of bonds
  • Capitalized interest funding is available during the construction period

Benefits

  • Investment grade bond interest rates have historically provided a lower cost of capital
  • Issuance costs are shared by all borrowers and are therefore kept to a minimum
  • Construction escrow accounts can be created, eliminating the need and cost for interim construction financing

General Loan Guidelines

  • Days cash on hand: Greater than 42
  • Days in accounts receivable: Less than 62
  • Current ratio: Greater than 1.5
  • Operating margin: Greater than 0.5%
  • Debt to capitalization: Less than 67%
  • Debt service coverage ratio: Greater than 1.35 for the two prior fiscal years and forward, including additional debt service

Eligible Projects

  • Equipment purchases
  • Reimbursement of capital expenditures made during current fiscal year, as approved by bond counsel
  • New facility construction
  • Renovation of existing facilities
  • Refundings or refinancing of outstanding debt

Board of Investments Enhancement Fee

A fee schedule has been established taking into consideration the duration of the enhancement, the structure of the bond issue and the organizational entity. That fee is paid to the Montana Board of Investments when the bond issue is closed and has averaged between 115-135 basis points, or 1.15% - 1.35% of the principal amount of the bond issue.

Loan Process

The Master Loan Program is an attractive financing vehicle for your particular project and requires the borrower to send correspondence to the Authority describing the project and requesting an application. Once the application is completed, the Authority Staff will present it to the Authority Board and to the Montana Board of Investments for approval. Staff will provide additional information or clarification on the process.

Trust Fund Loan Program

Loans from the Trust Fund Loan Program are made from the Permanent Coal Tax Trust Fund managed by the Montana Board of Investments. Short and long term loans are both available under this program as they are applicable to credit of the borrower, the type of financing, and the term of the loan. Authority Board approval is required.

General Loan Terms

  • Minimum loan size: $250,000
  • Maximum loan size: $1,500,000
  • Five years for equipment
  • 20 years for real estate
  • Take out loan available for bank financed construction loans

Fees

  • Origination fee: 1%
  • Borrower out-of-pocket expenses include borrower attorney, recording fees, etc.
  • Monthly loan service fee: 50 basis points
  • Appraisal and environmental audit fees for real estate loans

Interest Rates

  • Interest may be locked in for a 12 month period with receipt of 50% of origination fee contingent on Authority Board approval.
  • Trust Fund Loans are based upon the prior monthly average of the Federal Home Loan Bank of Des Moines Fixed Advance Rate for the respective loan terms.

5-Year Term

  • FHLB Advance rate plus 0.60%, or 2.25% — whichever is greater
  • Current rate of 4.65% effective May 1, 2025

7-Year Term

  • 7-year FHLB Advance rate plus 0.60%, or 2.50% — whichever is greater
  • Current rate of 4.93% effective May 1, 2025

10-Year Term

  • 10-year FHLB Advance rate plus 0.65%, or 2.75%  — whichever is greater
  • Current rate of 5.23% effective May 1, 2025

15-Year Term

  • 15-year FHLB Advance rate plus 0.65%, or 3.00% — whichever is greater
  • Current rate of 5.56% effective May 1, 2025

20-Year Term

  • 20-year FHLB Advance rate plus 0.70%, or 3.25% — whichever is greater
  • Current rate of 5.97% effective May 1, 2025

Expedited Loan Process

Usually these loans can be processed in 60 days or less. Documents generally consist of a loan agreement and a security agreement. Contact the Authority for application. Staff may approve the loan, or present to the Authority Board for consideration. The Authority staff will draft the loan documents and the closing will occur through the mail.

Direct Loan Program

The Authority will make direct loans applicable to the credit of the borrower, the type of financing, and the term of the loan. Eligible projects include construction and renovation, facility acquisition, refinancing of qualified outstanding debt, the purchase of equipment and financing costs.

Interest rates

5-Year Term

  • US Treasury 5-year note rate plus 0.15%, or 2.00% — whichever is greater
  • Current rate of 4.10% effective May 5, 2025.

7-Year Term

  • US Treasury 7-year note rate plus 0.20%, or 2.15% — whichever is greater
  • Current rate of 4.34% effective May 5, 2025.

10-Year Term

(Refinancing or tied with Trust Fund Loan projects only)
  • US Treasury 10-year note rate plus 0.30%, or 2.25% — whichever is greater
  • Current rate of 4.66% effective May 5, 2025.

Expedited Loan Process

  • Submit a letter of application and copies of three past-year financials
  • Loans processed in 60 days or less
  • Staff drafts loan documents
  • Closing will occur through the mail

General Loan Terms

  • Minimum Loan Size: $5,000
  • Maximum Loan Size: $300,000 for new projects; $500,000 for refinancing projects
  • Loan term of up to seven years for new projects; ten years for refinancing projects
  • Collateral is required
  • General Loan Guidelines
  • Loans provided on a first-come-first served basis
  • Monthly electronic payments
  • Positive net worth fund balance

Fees

  • 1% origination fee
  • Borrower out-of-pocket expenses, as applicable

Montana Capital Assistance Program

The purpose of the Montana Capital Assistance Program is to assist Critical Access Hospitals, small rural hospitals with less than 50 beds or other eligible health care facilities with the development of a Capital Improvement Plan to assess the feasibility of proposed capital expenditures or energy efficiency audits.

Eligibility

The following hospitals and health care facilities are eligible to apply for and receive MCAP assistance:

  • Montana hospitals that have been certified as a Critical Access Hospital
  • Montana hospitals located in a rural area of Montana with less than 50 licensed hospital beds
  • Health care clinics located in a rural area of Montana with no hospital services, located at least 25 miles from a licensed hospital
  • Must show financial need for grant assistance with excess revenues over expenses of less than $1,000,000 in the three years prior to application
  • Prior to submission of the MCAP Site Application, the applicant's governing body must have formally approved pursuing a Capital Improvement Plan either by resolution or motion

Application Process

An eligible healthcare facility interested in obtaining technical assistance through MCAP should reach out to the MFFA and complete an application.

MCAP Services

MCAP provides technical assistance support in five areas – Scope of Service Review, Facility Master Plan, Capital Financing Plan, Legal Assistance and Energy Efficiency Audits. Approved technical assistance projects must be completed within 12 months of MCAP award.

  • Scope of Service Review assists a facility in determining the gaps and overlaps in their community’s services, evaluating future service demands and more fully developing pertinent services.
  • A Facility Master Plan, a critical step in the development of a facility’s CIP, includes an inventory and evaluation of existing conditions of the facility and prioritization of improvement, renovation or new construction needs.
  • Capital Financing Plan includes identifying financing options, establishing a time schedule that integrates the funding with the proposed capital expenditure and developing a brief written document that is formally adopted by the governing body.
  • Legal Assistance aids an eligible facility in offsetting attorney expenses in developing a capital financing proposal.
  • Energy Efficiency Audits help facilities evaluate their energy usage to identify areas where efficiency could be improved. 

Costs

Each eligible hospital or health care facility may apply for up to $25,000 in MCAP funding for assistance with Scope of Service Review, Facility Master Plan, Capital Financing Plan, Legal Assistance and/or Energy Efficiency Audits. Approved applications require a 20% cash match from the facility. MCAP is a reimbursement program. After the project has been completed and all pertinent invoices have been paid by the facility, MCAP will reimburse the facility 80% of the costs of the project, up to a maximum of $25,000. Once the maximum award is reached, eligible facilities may not reapply for MCAP funding for five years.

Due to limited funds under this program, the MFFA reserves the right to deny applications if sufficient need is not shown. Technical assistance is provided through consultants selected by the facility and approved by the MFFA.