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Providence Financial



This is the time of year when I attend several charter school conferences sponsored by various organizations. As I reflect on most of the activity that takes place at these conferences, I am reminded of something I learned about mating elephants. The important activity takes place at a very high level with a great deal of noise and ceremony. The results of this great moment will not be evident, if at all, for 22 months! All too often, self-important individuals speak or participate on panel discussions at charter school conferences about topics upon which they may or may not be an expert, but they love making a lot of noise. This year in particular, I am struck by how little of the subject matter and information is on a level that is relevant to the day-to-day activities of running a charter school. I keep asking myself what all that drivel really matters to the people who count – the ones in the “trenches.” In saying the above, I must add that it does not apply to all presenters and panelists. There are some who are in touch with reality.

I spend my time helping charter schools finance their facilities, and I see a market that is changing very fast. In so doing, I don’t try to tell charter school managers how to execute their curriculum delivery or how to do all the other activities associated with running a school. I stay within what I know. I think experts in other fields need to do the same thing, but it is interesting that anyone who owns a suit and has financed a car thinks they can arrange the financing on their school’s facility. A case in point – I know at least two prominent attorneys in a charter- friendly state who have done their clients significant damage by trying to be their financial advisor as well as their attorney.

In these newsletters, we try to provide some ideas relating to the business and financial challenges that charter school people face in running a school. We try to keep it practical and relevant. We keep it in terms and language that all of us understand. I think there are a number of critical issues that relate to charter facility financing that are the most basic and pressing but almost ignored by the conferences and the organizations that sponsor them. Some of them are as follows:

We can arrange facility financing for qualifying charter schools as early as their first year of operation!

1- What does a start-up charter school do for a facility? I have seen them in old strip malls, office buildings, churches, modular structures, and anything else that will get them by for a few years until they can acquire a permanent facility solution.

2- How does a school with a modest student population build a building that will accommodate a much larger number of students when the school moves in? It is the classic “chicken and egg” problem…they need the students to get the building, but they need the building to get the students.

3- How does a school that only needs to borrow a modest amount of money (say under $4M) get access to the 100% loan-to-value financing and great fixed interest rates? Heretofore, that has been reserved for larger financings.

4- How does a charter school get working capital loans to bridge the gap between reimbursement payments that may be delayed or not paid at regular intervals?

We now have an excellent solution to problems #1 & 2 above by teaming with a developer who will build the new facility and lease it to the start-up or expanding school. When the school is in operation in their new facility and has their student count where it needs to be to cash flow the debt, we finance the purchase of the facility by the school from the developer. We can arrange facility financing for qualifying charter schools as early as their first year of operation! We can also arrange facility financing for a qualifying charter school that is undergoing a significant expansion.

I am working hard on problems # 3 and 4 above and hope to announce solutions in a newsletter coming soon.

The market is changing so fast, due to increased investor demand for charter school bonds and the increasing number of underwriters getting into the market, that I can scarcely believe the developments in the last year alone. Just this past week, one of my clients (a charter school that is expanding significantly but is a good credit) received a coupon rate of 5.5%, fixed rate, 30 year amortization, 100% loan to value. It was unrated and un-enhanced. Just one year ago, a similar school would have paid around 7% for the same financing.

The only thing we can really count on in this market is continued change— and it is very exciting!

Brent Van Alfen, President, Providence Financial Co., Inc.
Phone: 801-299-8555, Email: