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Private Activity Bonds

The Florida Development Finance Corporation [FDFC] provides access to Private Activity Bonds (PAB). Private Activity Bonds are obligations that benefit nongovernmental persons, such as private businesses, charitable organizations or individuals.  If the bonds meet specific criteria the interest earned may be tax-exempt.  

Tax-Exempt Bond Financing 

Tax-exempt bonds are issued and sold by a governmental entity, the “issuer” (such as the FDFC). The bonds are purchased by a bank or investor(s). The proceeds from the sale of the bonds are then loaned to the entity, which uses the borrowed funds to finance certain capital projects. The interest on the bonds received by the investor is exempt from federal income tax. Tax-Exempt Bond Financing refers to the interest that investors receive on the bonds.


IRS Guide - Private Activity Bonds

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Qualified Borrowers

Bond counsel will determine if a qualified borrowers seeking a tax-exempt bond issuance meet either:  

Private Business Tests

(1) Use - AND - (2 )Security or Payment


  • More than 10 percent of the proceeds of the issue are to be used in a trade or business of a nongovernmental person


  • Any activity carried on by a person other than a natural person is treated as a trade or business.

Security or Payment

  • If more than 10 percent of the proceeds of such issue is directly or indirectly secured by an interest in:

    • property used or to be used for a private business use, or

    • payments in respect of such property, OR

  • Derived from payments (whether or not to the issuer) in respect of property, or borrowed money, used or to be used for a private business use.​


Private Loan Financing Test

Bonds of an issue are private activity bonds if more than the lesser of five percent or $5 million of the proceeds of the issue is to be used (directly or indirectly) to make or finance loans to persons other than governmental persons.

The meaningful benefits of Tax-Exempt Bond Financing: 

  • Lower Rates

    • Tax-exempt bonds generally offer lower interest rates because banks and investors are willing to accept a lower interest rate when they do not have to pay tax on the interest they receive on the bonds. 

  • Longer Terms

    • The FDFC is able to offer terms up to 35 years. 

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Benefits of Bond Financing

Renovation Tools

Eligible Projects

Electrical Construction Plans

Next Steps

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Connect with us

Our goal is to connect Florida Projects, here are immediate next steps to start the process: 

  • Determine capital needs. 

  • Create a financial model.

    • Determine how much debt can be supported with cashflows. 

  • Engage a financing team. 

    • Team should include a

      • Financial Advisor or Investment Banker

      • Bond Counsel

      • Corporate Counsel

      • Trustee

Connect with our office to discuss your project further and learn more.


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