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Lending & Credit

Bond Financing

We offer tax-exempt financing alternatives to qualified manufacturing and not-for-profit clients for projects that meet certain regulatory guidelines. We also participate in the "Beginning Farmer" bond program.

Tax-exempt financing can offer significant savings in interest costs because you can borrow at rates below taxable market rates. We offer the following alternatives depending on your financing needs:

  • Tax-exempt variable rate demand notes (or lower floaters)
  • Tax-exempt industrial development bonds
  • Tax-exempt "501(c)(3)" financing
  • "Beginning Farmer" bond program

Tax-exempt variable rate demand notes

The tax-exempt variable rate demand note (sometimes referred to as a lower floater) can be used by small- to mid-size firms which meet certain regulatory requirements which may include:

  • Must be a manufacturing facility
  • Proceeds must be used for acquisition, construction or improvement of a manufacturing facility, including the purchase of any new or used attached equipment
  • The size of the bond cannot exceed $10 million
  • Capital expenditures, including the current project, cannot exceed $10 million during the three years prior to issuance and three years after issuance

In this type of financing, Old National issues a letter of credit on behalf of the client. The bonds are then sold to investors who are seeking tax-exempt interest, low risk and high liquidity.

As the name implies, variable rate demand notes carry a variable rate of interest. The remarketing agent resets the interest rate on the bond each week. This means that the client has access to the short-term interest rate market. If the client would like protection from rising interest rates, it can fix its rate with an interest rate swap.

Tax-exempt industrial revenue bonds

Like the variable rate demand note, tax-exempt industrial revenue bonds are available to clients who meet specific criteria. However, this type of bond is purchased by Old National instead of being sold to other investors. The client still enjoys the benefits of low tax-exempt rates and can choose between a variable or fixed rate depending on its needs. Also, these bonds can be used for smaller transactions that may not be cost effective to do as a variable rate demand note.

Tax-exempt "501(c)(3)" financing

Certain not-for-profit organizations that qualify under Internal Revenue Code Section 501(c)(3) may also realize the benefits of financing projects with either a variable rate demand note or tax-exempt industrial revenue bond. Qualifying not-for-profit companies can finance virtually any project that involves the purchase of land and the construction of buildings or the purchase of equipment and other "hard" assets. Also, unlike for-profit manufacturers, not-for-profit organizations can use tax-exempt financing to refinance current, taxable debt.

Contact us

This is only a brief overview of our bond financing programs. For a complete analysis of your financing needs, please contact your Old National loan officer or

Larry Cochran
SVP, Capital Markets Division
(317) 295-1398
larry.cochran@oldnational.com