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MONTHLY NEWSLETTER:  MAY 2008 ISSUE

FINANCING ADVANTAGES FOR SCHOOLS IN SMALLER MUNICIPALITIES
(BUT IT DOESN’T NEED TO BE MAYBERRY)
BY RICK VAN ALFEN, CPA
PROVIDENCE FINANCIAL CO., INC.



Is your school in a municipality with a population of less than 20,000? Through a little-known program, the government subsidizes an excellent facility financing program for charter and private schools in municipalities of less than 20,000 people. Before you stop reading, this is not as restrictive as it initially sounds. To qualify, a school’s community does not need to resemble Andy Griffith’s rural, small town Mayberry; it can be a township or municipality that is contiguous to a large metropolitan area. In fact, we have used this program with a school that is part of a metropolitan area of two million people.

The features of this program include:

  • subsidized, low interest rates (currently below 5.5%)
  • fixed interest rates
  • up to a 30-year amortization and term
  • low financing fees (funded as part of the financing)
  • no cash out of pocket
  • provides financing opportunities for schools that may not qualify for other types of financing
  • less work for the school to complete than many other programs
  • minimum borrowing amount of $2 million
USDA guarantees of bank loans have been around for some time, but the terms are often not appropriate for a school. A more favorable variation of this program, which we think is much more beneficial for a school, is to use it in conjunction with a bond offering. The primary advantage of using this program with a bond offering is that it provides 30-year fixed interest rates instead of 20-year variable interest rates, as is common with USDA-guaranteed bank loans. This is a favorable feature that provides schools with future flexibility and stability.

The primary advantage of using the USDA program with a bond offering is that it provides 30-year fixed interest rates instead of 20-year variable interest rates…

This program is likely the most favorable type of financing available for qualifying schools. We would like to see more schools take advantage of this beneficial program; it is just a matter of making schools aware of its availability. I hate to see a school pay more for financing than they need to. We would be glad to provide you with more details.

Note from Providence Financial Co.
In our line of work, we have seen many charter schools make serious mistakes in the lease agreements they arrange for their facilities. We invited Al Dubin of Lighthouse Facilities Management, LLC to write the following article so charter school managers would have the right information before they enter into a lease.

For information contact Brent Van Alfen, Providence Financial Co., Inc.
Phone: 801-556-2290
Email: rick@providencefinancialco.com