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Providence Financial



Finding an attractive facility that will be an attraction to new students is a real challenge for a new charter school or a school that wants to significantly increase its student enrollment from one year to the next. I have seen schools do some very creative things with abandoned big-box-store buildings or warehouses, but there is nothing like a school facility that was built specifically for that purpose. It validates a charter school as being “for real,” and it helps attract students. The reality has been, however, that developing and financing a new school facility that is designed and built as a school and is a size that will accommodate the enrollment that is anticipated in the next year is a real challenge. In these cases, the school is either not in business yet or has an enrollment that is much smaller than the capacity of the building the board would like. In either case, the school does not have a track record that will allow it to obtain the desired financing on its own merits. Further, the board must choose a contractor to build the facility, land must be located, and construction or interim financing must be arranged for an amount of money for which the school likely does not presently qualify. Banks will often ask for personal guarantees for that type of debt. A board member or officer should never sign personally. So what is the solution to this dilemma?

There is a new breed of charter-friendly developers who have the expertise and the financial strength to build a school facility for a new charter. They will also build a new facility that an existing charter school can grow into. They do this in cooperation with the board as far as design, plans, etc are concerned; but they build the facility with their own financing and can sell it to the school as soon as the school can finance it – even if it is the first year of the charter’s existence. If the school wants to lease for a period of time or cannot buy the facility the first year after completion, they can enter into a lease agreement with an option to buy the building when the school is ready.

As a financial advisor, we can introduce you to reputable developers who will render this service and assume the associated risk at a reasonable profit. We have seen some unscrupulous developers in our travels that have absolutely crushed their school clients in debt, built shoddy facilities, left liens on the property for the school to take care of, etc. It goes without saying that a school must enter into an agreement with a developer that is above reproach. The school board representatives should check out the developer thoroughly and talk with their previous clients. A good advisor can do this for you.

There is a new breed of charter-friendly developers who have the expertise and the financial strength to build a school facility for a new charter.

During these past and current financial crises, some developers have lost their bank lines and subsequently abandoned two schools that I am aware of with footings poured and with a big bill on their property. It follows that a developer should be willing to verify that they have the financial strength and credit to perform on their commitments. Again, as your advisor, we can assist in this part of your due diligence.

While the services they perform can be of tremendous value to the school, great care must be used in choosing a developer/partner. As a financial advisor, we can introduce you to reputable developer companies. We can also assist in getting the interim financing for the developer as well as the permanent financing for the school when it is time to buy the facility. If a program of this type fits your needs, please give us a call.

For information contact Brent Van Alfen, Providence Financial Co., Inc.
Phone: 801-299-8555
Email: brent @ providencefinancialco . com