STEP for Nonprofit Housing

What is STEP?

The STEP (Streamlined Tax-Exempt Placement) Program makes below-market interest rate loans available to nonprofit borrowers by using tax-exempt nonprofit bonds.  STEP uses standardized documents that reduce the time and cost of issuing tax-exempt bonds, making this type of financing feasible to a wider range of borrowers and projects. STEP works best for nonprofit projects with borrowing needs of less than $5 million. Larger projects are possible using other Commission programs.

Who is Eligible?

STEP borrowers must be 501(c)(3) organizations. STEP lending partners can be commercial banks, thrifts, and credit unions. For-profit multifamily developers should contact the Commission regarding other available programs.

What are Typical Savings?

Borrowers are able to negotiate their interest rates with their lender, typically resulting in a savings of one to two percentage points below market interest rate.

What Types of Projects Can Be Financed?

Nonprofit 501(c)(3) organizations may finance capital facilities that are directly related to their purpose. Some examples include:

• Multifamily housing
• Nursing homes
• Assisted living facilities
• Homeless shelters
• Transitional housing
• Group homes
• Equipment
• Administrative offices

For-profit, religious, and health care uses may either affect tax-exempt eligibility or how much of your project may be financed with a tax-exempt loan. We are happy to help you determine whether all or part of the facility can be financed with tax-exempt bonds.

What Types of Activities Can Be Financed?

Restrictions do apply. Please contact the Commission for specific details.

• New construction
• Acquisition of land or buildings
• Rehabilitation
• Soft costs, like architectural fees
• Refinance of existing capital debt
• Bond Issuance fees

STEP Bonds Work like Regular Loans

The STEP program converts what would normally be a taxable loan into a tax-exempt bond. Because interest payments become tax-exempt income to the bank, the lender passes on their tax savings to the borrower in the form of a lower interest rate. Lower interest rates mean a lower debt service or a larger loan for the borrower. Lenders use the same underwriting criteria and determine the interest rate as they would for any typical commercial loan.

How Much Does the Program Cost?

Application Fee: The application fee ranges from $400 to $5000 depending on the amount of bond financing.

Public Hearing Notice: The public hearing must be published in a local newspaper. The cost of publication ranges from $200 to $1500 depending on the location of the project.

Bond Issuance Fee: The Commission’s STEP cost of issuance fee is 1% of the bond amount. This covers the cost of bond counsel and bond issuance.

Annual Fee: A fee of 0.25% of the outstanding bond amount is paid annually to the Commission. A portion of the annual fee may be waived for housing projects if they meet certain criteria.

Next Steps

Please feel free to contact our staff at the details below. We prefer to start working with nonprofits during the preliminary capital campaign planning stage. Many decisions made early on will affect your financing flexibility. For more detailed information on the STEP program, please also read STEP FAQ.  We are here to help you through the bond financing process. Bonds require several steps: a scoping meeting, a public hearing, additional loan documents and a Commission financing resolution. Sounds difficult, but we make it easy. If you are a nonprofit who needs to borrow funds for your capital project, you deserve a lower interest rate. By helping you save money on your debt service, you can put those valuable dollars toward serving the mission of your organization.

Submit a Nonprofit Housing Application

Contact banks:  Ask banks about their loan criteria and terms, and secure a preliminary bank loan commitment. Please ask lenders unfamiliar with our program to call us.  What will banks want to know?   Which banks have we worked with?

This page was modified on 06/29/2006.