A new method of selling bonds by New Jersey local government units (LGUs) directly to banks, rather than the usual sale procedures of a public offering, can result in lower interest rates and lower transaction costs benefitting both the LGU and the bank making the direct bank loan (DBL). DBLs can be used freely by authorities, such as sewerage authorities. Usually, municipalities, counties and Type 2 school districts are required to sell bonds at a competitive sale. In some circumstances, these LGUs may sell bonds at a negotiated sale. In such cases, DBLs may be utilized by such LGUs.
The advantages of a DBL include:
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