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The Building Block Fund is simple: we provide credit enhancements in the form of partial/limited loan guarantees, first loss/debt service reserves, substitute equity and/or additional collateral for charter school loan repayment obligations.
The fund helps lenders by taking on first-loss exposure and significantly reducing the risk of loans made to charter schools, and helps charter schools by giving them greater access to debt at lower rates for longer terms.
In short, we give some of your best potential customers - charter schools - the financial backing they need to obtain loans for the opening and operation of one of the most valuable assets a community can have: charter schools.
Charters and the Need For Capital Financing
Although charter schools are publicly funded (based on student enrollment), they typically receive less than traditional schools and usually do not receive any capital funding for facilities. Consequently most charter school operators must secure a commercial real estate loan to meet their facilities needs. But that can be difficult.
New charter schools are usually start-up non-profits with no assets or credit history, so no matter how much a lender might want to help, a school's lack of capital makes it too risky.
The Building Block Fund cuts that risk by providing credit enhancement in lieu of the cash equity or other collateral normally required for a commercial real estate loan.
The Building Block Fund and the Community Reinvestment Act (CRA)
The Community Reinvestment Act is a major force in ensuring fair and equitable access to financial services. Charter schools, because of their direct service to underserved populations and communities - and, in many cases, because of their locations within those communities - are often excellent CRA-eligible initiatives. By reducing the risk of loans made to charter schools, lenders can take advantage of these excellent opportunities to invest in underserved communities and fulfill their obligations under CRA regulations.
Charter School Financing: Reliable, Profitable
"After 25 deals I've had no losses or even late payments. The loans give me my largest margins and they're the most profitable piece of my portfolio." - Building Block Fund-participating lender
Dozens of lenders have participated in CSDC's Building Block Fund credit enhancement program.
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