Sources of Funding
Tax-Exempt Bonds
Tax-exempt bonds (TEBs) are the most available facility funding source for charter schools. This is because the TEB market is very well established, has trillions of dollars to invest, and has developed the analytical infrastructure to analyze charter school bond credits. Through 2022, over $40 billion of TEBs have been sold on behalf of charter schools. For all types of state and local government projects, over $400 billion of TEBs are issued annually. TEBs are also among the most flexible funding source toward how they can be used, able to fund acquisition, construction, refinancing, renovation, capitalized interest, and most expenses of the financing. TEBs can typically finance 100% of your project and its associated financing costs — the trade off is that the bond market typically wants more seasoned schools in return for 100% financing.
New Markets Tax Credits
New Markets Tax Credits (NMTCs) are a federal program which allows a qualifying project to benefit from a subsidized funding source. This subsidy lowers a charter school’s cost of capital as well as its annual debt service during the 7-year period over which a tax-credit investor can claim their tax credits. The tax-credits form the basis of the subsidy because the investor in the tax credit gets their return from lowering their annual tax bill to the Federal government versus interest paid by the borrower. The subsidy comes in two ways: 1) a below-market interest rate during the 7-year compliance period, and 2) “forgiveness” of the 20-25% of the debt that was funded by the tax-credits at the end of the compliance period. To qualify, a charter school project needs to either: 1) be in a qualifying census tract, or 2) service a population which otherwise would qualify if the project’s location is not in a qualifying census tract.
To find out if your project is in a qualifying census tract, please CLICK HERE.
Other Funding Sources
In addition to Tax-Exempt Bonds and New Markets Tax Credits, Buck Financial Advisors LLC has arranged financing for charter schools through Qualified School Construction Bonds and from commercial banks, Community Development Finance Institutions (CDFIs), as well as private individuals. No other firm has experience with as many financing options as Buck Financial Advisors LLC.
