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7/29/2019 BCC Webinar II 5-26-10 v3
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Building Child Care
Project
7/29/2019 BCC Webinar II 5-26-10 v3
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Page No 2.
Financing Child Care Facilities:
Learn What Lenders Look For
Jon Dempsey
Senior Program Officer
Low Income Investment Fund
7/29/2019 BCC Webinar II 5-26-10 v3
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Page No 3.
Objective:
To help providers understand the financial documentation and
information necessary to access capital for facilities maintenance and
development.
Topics Covered:
Business Plan
Market Feasibility
Operational History and Strengths
Financial Analysis and appropriate documents
Criteria for Lenders
Loan Request Packages
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Page No 4.
Business Plan
Be Prepared to Tell Your Story
The operator should be able to answer the following items:
Organization mission/vision, purpose and services
Organization history
Is the organization successful?
What will sustain its success? Know how the organization compares to others that are similar
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Page No 5.
Market Feasibility
Demographics of community and target market
Demographic trends of community, target and industry
Going rates of early education/family support services in the area
How do services provided by others compare to yours?
What is your competitive advantage? What is your marketing strategy?
-Promotional and advertising strategies
In a fiduciary capacity, can the staff meet the compliance
requirements?
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Page No 6.
Operations
All responsesshould reflect new or existing project needs:
What is the center is licensed for & number of children?
Where does the organization currently operate?
What the impact if the loan is awarded?
What are the staff ratios according to age mix? Does your staff meet the educational requirements?
Does the center meet licensing requirements?
Are the center licenses in good standings?
The lender/investor will check!
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Financial Analysis
Get The Financial House in Order
Clear Credit Bureaus
Know your Internal Accounting Systems
Know your financial statements
Accounts Receivable/Contract Receivable
Accounts Payable/Contracts Payable How long does it take to pay vendors and/or accounts?
Revenue sources and their status
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Page No 8.
Financial Analysis
Understand Your Internal / External Historical Cash Flow
Understand the organizations financial historical trends:
Revenues
Expenses
Cash
Growth Patterns/Trends Balance Sheet Growth
Has the company prepared revenue and expense projections?
Do projection assumptions make sense?
Do projected trends tie in with historical trends?
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Page No 9.
Financial Analysis
Know How Much You Need
What is truly driving the need to borrow?
What is the source of repayment and what collateral is available, if
needed?
Know the limitations of the organizations capacity to borrow:
Debt Service Coverage Ratio Leverage
Collateral
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Page No 10.
Financial Analysis
Operator should prepare projections using most likely and worst case
scenarios and understand how the growth patterns in the projections
affect the following:
Revenues
Expenses Cash
Working Capital
Effect on Balance Sheet
Know the Balance Sheet:
Retained Earnings/Unrestricted Net Assets
How do Assets compare to Liabilities
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Page No 11.
Financial Analysis
Prepare a Capital Expenditure Budget
Prepare a capital expenditurebudget to cover at least twelve months:
Identify the ongoing equipment needs
Anticipated timing of each expenditure activity
How the organization will pay for expenses
Indicate if its a routine or planned expansion
Note: This should cover big ticket items such as, roof and air
conditioner replacement, kitchen appliances, furniture, playground
equipment
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Page No 12.
Financial Analysis
Alternative Sources Available
Operator should have additional funds (reserves) available to cover the
following:
Additional equity infusion
Construction overages
Cash shortfalls during operation Working capital
Lagging receivables
Growth periods
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Page No 13.
Assess an Operators Credit Worthiness
The Five Cs of Credit
Cash flow/Capacity to repay
Character/Capacity to be a responsible borrower
Credit history
Capital investment
Collateral
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Page No 14.
Loan Request Package
Cover letter
Completed business plan with market feasibility study
Completed loan application
3 years business financials/tax returns
Recent Interim Financial Statement (dated within 90 days or less) Projected Income and expenses covering at least three years
(preferable ten)
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Page No 15.
Resources
LIIF/ABCD: www.liifund.org
Building Child Care: www.buildingchildcare.org
http://www.liifund.org/http://www.buildingchildcare.org/http://www.buildingchildcare.org/http://www.liifund.org/7/29/2019 BCC Webinar II 5-26-10 v3
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Page No 16.
Questions
Jon Dempsey
Low Income Investment Fund(213) 627-9611 x122