Charter schools and private schools need private funding. What are you waiting for?

Christopher Farrell and Chris Sanders, co-owners, Sanctuary Lending

As published in Scotsman Guide's Commercial Edition, May 2007.

Some of us might be driving past excellent potential clients daily. What is this untapped opportunity you could be overlooking? Privately funded and charter schools in your area.

Private and charter schools must be state-approved and qualified, but unlike government-run public schools, these schools require private funds from banks, donations, capital-raising campaigns and philanthropy.

As the charter concept has become more recognized, successful banks, corporations and mortgage brokers have developed ways to provide capital to charter schools at favorable rates. For commercial mortgage brokers, these schools can present an excellent business opportunity.

Understanding charter schools

According to the National Center for Education Statistics, a charter school is a publicly funded school that has been granted a charter exempting it from selected state or local rules and regulations. As such, it is sometimes referred to as an "experimental school." It is typically governed by a group or organization under a contract or charter with the state.

U.S. charter schools have been around for about two decades. In fiscal year 2007, President Bush proposed budgeting more than $214 million to support charter schools, according to the U.S. Department of Education. More than $15 million was earmarked to help these schools purchase facilities.

According to the Center for Education Reform, there are 3,977 active charter schools in 40 states, plus the District of Columbia and Puerto Rico. These serve approximately 1.15 million students.

Most charter schools begin in ad hoc spaces such as rented retail facilities, former churches, lofts and warehouses that are converted into classrooms and cafeterias. School assemblies often take place in unused gym space, supplemented by other organizations. Once these schools are more established and gain state and federal approval, they can acquire loans and move to permanent facilities.

Many states and loan agencies are beginning to tackle the temporary-space problem by providing start-up funding and educating charter schools about how to obtain favorable loans.

Make yourself known

When marketing to schools or to any other education institutions, it's best to start in your own back yard. Even if your state does not have charter schools, it still likely has private schools. Whether or not these schools are religiously affiliated, they probably need financing at some point.

The key to a successful institutional-marketing campaign is getting the word out -- to let them know you are ready and can assist them with their financial needs.

Cold calling schools may not always get the best results. When approaching a school, it is best to do so by reference. If you have children, you belong to a church or you are otherwise involved in the community, you may be talking to your best source of references every day -- parents.

Some well-timed questions about "public school alternatives" may be all it takes for your best leads to start talking. Parents love to talk about their children's schools. After a few conversations with different parents, you will likely discover your best lead -- typically a board member or even the school's owner. At this point, it's best to have the parents who referred you make an introduction for you.

Deferring to experience

Once you have made contact and received positive feedback, you may need to find a lender or broker that specializes in school lending. In many cases, these companies will agree to a commission split and a "we'll take it from here" mentality. Because you will be the initial contact to the school, you must sign fee agreements as well as noncircumvention/nondisclosure contracts.

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