USDA Financing of Rural Charter Schools

What federal agency has funded more charter schools facilities than any other agency? The U.S. Department of Agriculture provides key financing to develop essential community facilities in rural communities. Through the USDA Rural Development’s Community Facilities Direct Loan and Grant Program and the Guaranteed Loan Program, nearly 100 rural charter schools have received more than $570 million in financing since 2008.

Key Features of the Programs:

• Eligible communities are any city, village, township, town, or Tribal land with a population less than 20,000 based on the most recent census.
• Entities can apply for a direct loan, grant, or loan guarantee to construct, purchase or improve an essential community facility.
• Since 2008, schools received financing from $51,500 to $18 million, with an average financing of $4.5 million.

USDA financing programs have proven to be an effective source of financing for rural charter schools. As more rural communities build charter schools, the Charter School Facility Center recommends:

1. Improve the content, reliability, and accessibility of USDA and charter school financing information. Charter schools represent a significant potential market for USDA lending, and improving the availability of valuable information that the USDA publishes and tracks will ensure more financing and more community access to charter schools.
2. Create standard guidance across USDA state offices. North Carolina, Utah, Delaware, and Hawaii account for the majority of states where rural charters have accessed this financing, and knowledge of and standards for this program among state offices appears to be uneven. The USDA can ensure that each state office is aware of the applicability to charter schools, as well as best practices.
3. Reframe feasibility studies. The scope and accompanying cost of pre-financing feasibility studies are cited as excessive and even prohibitive by schools. It is not clear that the information required for feasibility studies makes for stronger schools or better loans. The USDA should consider creating feasibility studies that require the most critical information needed.
4. Plan ahead and be persistent. Schools must allot significant time for the financing process and must follow up on materials submitted, questions asked, or other communications. Schools should not let the first roadblock become a barrier to accessing funds.
5. Expand the marketplace and network with schools. The success and volume of charter school transactions in the top states provides evidence of the market’s potential. Finance professionals can develop and support state markets and ensure more schools, including small rural schools, can have access to financing.

Download USDA Financing of Rural Charter Schools to learn more.