charter schools - managing cash for solid growth

Copyright © 2013 Charter School Capital, Inc.

MANAGING CASH FOR

SOLID GROWTH

NC Alliance for Charter Schools

Conference

March 22, 2013


Welcome.

3Copyright © 2013 Charter School Capital, Inc.

WELCOME

• Stuart Ellis – Founder and CEO• Jon Dahlberg – VP of Business Development and Facilities

Panelists


MANAGING GROWTH

• Cash flow growth– Basics– Identifying your growth initiatives– Sources and evaluation

• Growth capital options– Working capital– Facilities– Resource development

What We Will Cover Today


WHO WE ARE

100% Dedicated to charter schools

• Specialty finance company serving only charter schools–Working capital–Facilities capital–Resource Development capital

• Began funding charter schools in California in 2007• Over $500M of funding provided to date• Team of 30+ professionals dedicated to delivering timely and flexible

solutions • Relationships with over 300 charter schools serving 250,000 students• National footprint• Stellar track record with schools and investors


WHERE WE ARE

412,000983

135,000524

40,000147

188,000280

179,000 520

122,000259

126,000360

103,000164

CSC

StudentsSchools

82,000179

64,000184

56,000104

45,000109

49,00048

45,00081

43,00099

41,000235

32,00053

31,00072

26,00080

26,00063

23,000116`

21,00041

19,00047

19,00043

17,00084

17,00033

18,00050

11,00031

10,00022

9,00031

10,000407,000

20

4,00018

6,00017

1,00011

3604

3006

3284

6,00027

5,00016

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Planning For Growth


CASH FLOW BASICS

Growth requires good cash flow management

• Think of cash flow as a tool• Reduce emotions from cash flow decisions• Less time managing cash flow means more time educating students• School size and mission doesn’t impact cash flow management


CASH FLOW FOR GROWTH

• Continuous and dynamic• Open and transparent

communication• Relationship-based

Goal: Greater Impact

GROWTH


IDENTIFYING GROWTH INITIATIVES

• “I would promote my school more aggressively and more frequently.”• “I would expand my existing facility to add more grades or

classrooms.”• “I would increase or add new programs to better serve my students,

their families and the community.”• “I would increase my use of technology to further engage my students

and empower my teachers.”• “I would invest is professional development for my teachers so they

are trained on the latest instructional best practices.”• “I would replicate my program in a new location in our city or state.”

What if money wasn’t an issue?


DIVERSITY OF CAPITAL

• Working and growth capital–Short term liquidity

• Facilities financing–Long term stability

• Resource development– “Free Money” as much and often as possible

Use different sources for different needs


EVALUATING ANY CAPITAL

Compare Costs:

• Evaluate costs• Measured in dollars, not interest rates• Include your time – it is VALUABLE!

1

Compare Risks:

• Access to funding – can you get as much as you need• Increased Costs – are the costs known or estimated• Default risk – what is the risk of default• What is the impact on the business (school)

2


Working Capital Growth


WORKING CAPTIAL

Balanced budget ≠ successful cash flow management

July August September November December January February March April May JuneOctober

Cash Flow Need Available Cash Flow


WORKING CAPITAL

• Loans• Lines of credit• Private loans• Receivables sale

Funding options for your school


FUNDING OPTIONS

Criteria

Amount of need

Access

Cost

Default Risk

Loan

At Application

~ 20 - 30%

Varies

School

Large (Blanket Lien)

Private Loan

At Application

?

?

School(?)

?Collateral Constraints

LOC

Varies(Limited)

~ 20 - 30%

Varies

School

Receivable Sales

Flexible

> 90%

Fixed

State

Large (Blanket Lien)

Small (only Receivable)


Facilities Growth


FACILITIES CAPTIAL OPTIONS

Security

Growth Options

Underwriting

Annual cost

Cash needed

Criteria BANK BondTraditional

BankLT Lease /

OptionCashCash Traditional

BankBond

LT Lease Option


Security

Growth Options

Underwriting

Annual cost

Cash needed

Comparison for illustrative purposes only. Rankings are based on how hypothetical “School A” might view its options based on unique attributes and objectives.

Criteria Cash BondTraditional

BankLT Lease /

Option

FACILITIES CAPTIAL OPTIONS


FACILITY FINANCING

Customized to meet specific need of each school

• Full-service specialty resource–Selecting the right funding partner / structure

o Bond, Loan, LT Lease + Option–Commercial developer–Architect–General Contractor–Design/build

• Flexible and adaptive to each unique project• Ongoing access to working/growth capital


FACILITY FINANCING

• Stable or increasing enrollment• Strong demand – waiting list, expanding grades, market growth• Experienced leadership team• Market leading academic performance• Sound financial performance• Debt service/facility cost < 20% of total revenue• Compelling or differentiated story

Qualification criteria for any structure


Resource Development Growth


RESOURCE DEVELOPMENT

• Supplement school personnel resources to identify and pursue “no-cost” funding sources

• Federal and state entitlement funding–Working capital to bridge delay to earned entitlement program

funding–Medicaid reimbursement administrative services

• Grants and philanthropic funding– Identify national/regional sources– Aggregate schools into categories

oStudent demographicsoGeographic preferences/orientationoAcademic/program focus

Connecting schools to alternative sources of funding


WHAT GROWTH MEANS

• Identify the initiative• Communicate clearly with all key stakeholders• Know the right funding source for your needs• Evaluate all the cost

Capital provides the leverage to reach more students


Questions?Presentation available at: SlideShare.net/CharterSchoolCapital


Jon Dahlberg

[email protected]

Thank you!

charter schools - managing cash for solid growth

Education

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hypothetical school

funding charter schools

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cash flow basicsgrowth

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