New Jersey Community Capital (NJCC) became one of the first community development financial institutions (CDFIs) to offer charter school facility financing when it began making charter school loans more than six years ago. The company started making these loans because traditional lending institutions were unable to meet the facility financing needs of these schools.
Unlike traditional public schools, charter schools do not receive any funding for building, buying, or leasing facilities. Despite this funding disadvantage, many charter schools provide a real educational choice to families living in areas where district schools are underperforming.
The most common financing request is for working capital lines of credit to bridge operating costs from when the school begins operating (typically in August) through when its first local and state funding checks arrive (typically in October or November). NJCC offers flexible financing products, including predevelopment, site acquisition, site renovation, and new construction loans; leveraged debt for New Markets Tax Credit transactions; bridge financing; mini-permanent financing; lease guaranties; and some working capital lines of credit.
Students participate in a civics class at TEAM Academy Charter School, located in the former St. Charles Borromeo School in Newark, NJ.
NJCC provided direct financing to more than 14 charter school campuses with aggregate loans outstanding of nearly $22 million. Since 2004, NJCC has leveraged over $115 million in charter school development costs that benefit 5,500 students.
In 2006, NJCC received an $8.15 million grant from the U.S. Department of Education’s Credit Enhancement for Charter School Facilities program. The grant gave NJCC the ability to provide additional credit support to certain charter school facility loans where additional value was needed or excessive risks needed to be mitigated. NJCC has achieved a leverage ratio of over 11 to 1 with the federal grant.
NJCC believes that education is the bedrock of community change. Charter schools create educational opportunities for young students in New Jersey’s most at-risk communities. With more than 11,000 students currently on charter school waiting lists, the demand for charter school facility financing will no doubt continue to grow.