Blog Post

How to Choose a Lender for Your Charter School (Hint: It's a Lot Like Being in a Relationship!) Dominique Fortune, Director, Charter School Lending, NFF

A loan from a community development finance institution (CDFI) can finance a new facility, allow you to hire new staff, or ensure you have enough cash on hand to run your school effectively while you wait for reimbursement from a government grant. But not all loans are created equal, and choosing which lender to work with can be daunting. How do you decide which CDFI is right for your school?

As it turns out, finding the right CDFI to partner with can feel a lot like the beginning of a relationship. You might ask yourself similar questions: “Can I see myself spending a lot of time together? Will they get along with my friends – partners and other people in my organization's network?”

If you're seeking a lender for your school, here are three questions to ask yourself to make sure you end up in a healthy relationship.

  1. Do you trust each other? Relationships are built on trust – and a financial relationship is a relationship like any other. Many charter schools I’ve worked with share experiences of compiling seemingly endless documentation for lenders – documentation those lenders could easily have found on those schools’ websites. Demanding documentation without a clear purpose demonstrates that the lender doesn't trust the charter school to do its job. Many charter school leaders – especially those who are people of color – understandably distrust lenders who request massive amounts of documentation, require validation from other partners in the charter school space, and demand valuable time from charter school staff. If your lender starts off the relationship by failing to take a client-centric approach, it might be a sign of trouble to come! When you can, seek out CDFIs that do due diligence themselves (instead of asking you to do it for them), ask for only what they need, and advocate for you throughout your credit application and review process. These are all signs that the CDFI trusts you and believes in your organization. Remember, you and your lender should share a common goal: bringing a high-quality education to the young people in your community.  
  2. Do you like their friends? Meeting your partner’s friends is a big step; it tells you whether the person you’re in a relationship with is the person you thought they were! It’s no different with a lender. Lenders – especially mission-driven ones like CDFIs – work with dozens of funders, partners, businesses and community organizations. Seeing who your lender chooses to partner with can tell you a lot about what they value. Need an architect to design your school’s new building? A connection with a grantor who could fund a program? Depending on who your CDFI partner is, they may also be able to facilitate connections with new partners who can help you achieve your mission.  
  3. Do you share the same values? Arguably, this is the most important thing to consider when starting a relationship... or finding a lender for your charter school. Like I said above, your mission is clear: to create opportunities for the young people in your community. Your lender should share this goal, recognizing that investing in your operations is a key part of making it happen. Beyond simple mission alignment, any CDFI you partner with needs to understand the specific priorities of your organization – and support them! Do you care about social and emotional learning opportunities for your students? Do you have explicit targets around anti-racist practices? Your lender must understand why that’s important. Don’t be afraid to ask questions (and do your own research) to get to the bottom of what your lender values early on; it’ll help you determine whether that lender is right for you.

A partnership between your charter school and the CDFI you choose is far more than a simple exchange of money. Ideally, it’s a long-term engagement built on trust, relationships, and shared purpose. Finding the right lender can be challenging, but it’s worth it: a financial institution that truly has your best interest in mind and recognizes your contributions can unlock massive opportunities both for your school and the families you serve.

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