Charter School Financing

Did you know there are more than 7,000 public schools operating under charters in the United States today? These schools are educating over 3.2 million children and have over a million children on wait lists. These numbers make it quite evident that charter schools are in high demand. However, many of these schools are in desperate need of higher-quality education space. This is why the topic of charter school financing is so important. These schools need to be empowered with factual financing knowledge. With this information, they can take charge of their finances and reach their facility goals. In this bite-sized article, we will dispel 9 common charter school financing myths and provide you with some inspiring facts.

 

Charter School Financing vs Cash Reserves

Myth: Charter schools should use their cash reserves to finance their facility needs instead of looking for outside financing options.

Fact: Using outside financing to purchase, construct or renovate a facility can make a charter school more financially secure. By leveraging favorable interest rates and not depleting important cash reserves a charter school can improve its financial situation.

 

100% Financing Available

Myth: In order to qualify for financing, you need at least 20% equity down.

Fact: Depending on the financing source, charter schools can get 90%-100% financing of their entire cost of their new facility.

 

Charter Schools Are Businesses

Myth: Running a charter school is not like running a business.

Fact: A charter school is a business and making smart, informed business & financial decisions will benefit your school’s stability, growth, and attractiveness to possible lending institutions.

 

Lenders Investigate Academic Performance

Myth: When charter schools apply for financing, lenders only investigate a school’s financials.

Fact: Academic performance is just as important if not more important than financial performance. Lenders are aware that an “A” rated school will not be closed, making it a sound investment opportunity.  However, a “B” or “C” rated school would be considered a higher risk investment and not as likely to qualify.

 

Many Types Of Financing

Myth: Bonds are the best financing option available to charter schools.

Fact: Only 12% of charter schools have accessed bond financing. There are many financing options available to charter schools with very favorable terms and conditions

 

Aim For A Charter Renewal

Myth: The age of a charter school does not matter when applying for financing.

Fact: Most lenders want a charter school to have at least one charter renewal under their belt before offering financing. This is because the lender wants to know the school has performed well enough to qualify for a renewal. This displays a greater stability and track record for the school to the lender.

 

Conventional Banks Lend To Charter Schools

Myth: Conventional banks won’t provide charter school financing.

Fact: In years past, this was the case. However, charter schools have become more commonplace. Therefore, banks have become more familiar with them and how they operate. Because of this, there have been some great charter school financing arrangements made by local and regional banking institutions.

 

Pre-qualify First

Myth: The starting point of any charter school facility development project is to identify an ideal piece of real estate.

Fact: Step number one should always be pre-qualifying the school for financing. The qualification process will reveal just how much financing your charter school will be able to receive. This sets the project’s budget parameters.

 

There Are Other Options

Myth: Charter schools should always strive to own their facilities.

Fact: Charter schools are in the business of educating students, not necessarily owning and managing real estate. There are many financing and real estate options available that will give your school control and security over its facility without having to own it.