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Growth strategies for managing cash presented at the 2013 North Carolina Alliance for Charter Schools Conference.
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Copyright © 2013 Charter School Capital, Inc.
MANAGING CASH FOR
SOLID GROWTH
NC Alliance for Charter Schools
Conference
March 22, 2013
Copyright © 2013 Charter School Capital, Inc.
Welcome.
3Copyright © 2013 Charter School Capital, Inc.
WELCOME
• Stuart Ellis – Founder and CEO• Jon Dahlberg – VP of Business Development and Facilities
Panelists
4Copyright © 2013 Charter School Capital, Inc.
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
5Copyright © 2013 Charter School Capital, Inc.
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
6Copyright © 2013 Charter School Capital, Inc.
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
??
Copyright © 2013 Charter School Capital, Inc.
Planning For Growth
8Copyright © 2013 Charter School Capital, Inc.
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
9Copyright © 2013 Charter School Capital, Inc.
CASH FLOW FOR GROWTH
• Continuous and dynamic• Open and transparent
communication• Relationship-based
Goal: Greater Impact
GROWTH
10Copyright © 2013 Charter School Capital, Inc.
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?
11Copyright © 2013 Charter School Capital, Inc.
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
12Copyright © 2013 Charter School Capital, Inc.
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
Copyright © 2013 Charter School Capital, Inc.
Working Capital Growth
14Copyright © 2013 Charter School Capital, Inc.
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
15Copyright © 2013 Charter School Capital, Inc.
WORKING CAPITAL
• Loans• Lines of credit• Private loans• Receivables sale
Funding options for your school
16Copyright © 2013 Charter School Capital, Inc.
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)
Copyright © 2013 Charter School Capital, Inc.
Facilities Growth
18Copyright © 2013 Charter School Capital, Inc.
FACILITIES CAPTIAL OPTIONS
Security
Growth Options
Underwriting
Annual cost
Cash needed
Criteria BANK BondTraditional
BankLT Lease /
OptionCashCash Traditional
BankBond
LT Lease Option
19Copyright © 2013 Charter School Capital, Inc.
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
20Copyright © 2013 Charter School Capital, Inc.
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
21Copyright © 2013 Charter School Capital, Inc.
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
Copyright © 2013 Charter School Capital, Inc.
Resource Development Growth
23Copyright © 2013 Charter School Capital, Inc.
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
24Copyright © 2013 Charter School Capital, Inc.
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
Copyright © 2013 Charter School Capital, Inc.
Questions?Presentation available at: SlideShare.net/CharterSchoolCapital