[Editor’s note: Beginning with this issue, Rick Van Alfen and his associate Brent Van Alfen will be writing a regular column focusing on charter-related issues in the areas of business and finance.]

Is your charter school in a municipality that had a population of less than 20,000 in the 2000 census? If so, you may have an opportunity to finance your school facility at very favorable interest rates and terms using a financing structure with a guarantee from the U.S. Department of Agriculture (USDA). These terms include:

• subsidized, low interest rates
• fixed interest rates for the term of financing
• up to a 30-year amortization and term
• low financing fees (funded as part of the financing)
• no cash out of pocket
• a financial opportunity for schools that may not qualify for other types of financing
• no personal guarantee

I particularly want to mention a recently announced USDA financing program that can be used specifically for the construction or renovation of charter school facilities. This program was funded by the 2009 American Reinvestment and Recovery Act (ARRA), more commonly known as the “Stimulus Program.” The Stimulus Program provided $1.1 billion to the USDA, through 2010, for loans to facilitate construction and renovation of essential community facilities in municipalities of less than 20,000 in population (per the 2000 Census). Because charter schools are considered essential community facilities, they can participate in this program if they meet the guidelines. 
 
The goal of this program is to improve the quality of life for rural residents through the provision of essential community facilities such as health care, public safety, and education. The Stimulus Program is intended to create jobs and invigorate the economy.

Current interest rates for this program are approximately 4.5% (fixed rate) with a 30-year term and amortization. Compare this to current prevailing long-term rates for charter schools of around 8% in the long-term bond market. This program also eliminates the need for separate construction financing and long-term financing, as is common with more traditional lending sources. With this program there is only one closing for the construction/renovation and the long-term financing. This is another benefit of this program as it eliminates double closing costs and the risk of closing on construction financing without a guarantee of long-term financing. Additionally, unlike typical bank financing, a charter school does not need a personal guarantor for the financing.

This program is likely the most favorable type of financing available for qualifying schools. Because the funds from the Stimulus Program are only available through 2010, however, there is some urgency to apply as soon as possible. In addition, because this is a government program, there is much paperwork and many requirements involved. However, with the right guidance, you can determine whether your school qualifies for the program, and if so, how to work through the process to take advantage of this very beneficial program.

Rick Van Alfen is a CPA with Providence Financial Co., LLC. For more information, contact Rick at (801) 556-2290; rick@providencefinancialco.com.