The source of financing for construction projects differs depending on the type of facility being constructed. The type of financier also has a substantial effect on the type of financing arrangement that can be utilized for your project. As a contractor, you’re concerned with the big picture, so it follows that your financing arrangements are front and center when trying to keep your project on the rails. If you’re worried that your financing arrangements are threatening to upend your project, contact a Miami construction lawyer.
In this four-part series, our Miami construction lawyers will discuss institutional arrangements for financing your construction projects. Whether you’re working with a private corporation or a public developer, it’s important to understand that the rules regulating your financing arrangements will have a significant impact on the future of your project.
If you are contracted to work on a municipal project in the United States, the project is likely financed using tax-exempt bonds. In other words, with tax-exempt bonds, interest payments issued to a lender are exempt from income taxes. Another benefit of tax-exempt municipal bonds is that they can be acquired at lower interest charges. Municipal projects are just one example of how different institutional arrangements have developed unique protocols aimed at improving financing for a diverse array of facilities and organizations. Some examples of municipal projects include:
- City Hall
- Fire Station
- Post Office
When you partner with a private corporation whose goal is to manage large capital projects, they may opt to finance the project with retained earnings, by seeking equity partners, issuing bonds, introducing new stocks in the financial markets, or finding an alternative source of borrowed funds. In this scenario, potential sources of financing would most likely include pension funds, insurance companies, investment trusts, commercial banks, and other private entities looking to invest liquid capital.
In part two, we will continue to discuss common sources of financing and the unique institutional arrangements that have been established with them in mind. In parts three and four, our Miami construction lawyers will explore different types of financing plans and arrangements.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.