Charter schools pursuing bond financing for major facility projects face a critical challenge: funding the substantial pre-development expenses that occur months or years before bond proceeds become available. Bridge to bond financing provides a strategic solution for managing these upfront costs without depleting operational cash reserves.

Understanding Bridge to Bond Financing

Bridge to bond financing is a short to mid-term funding solution designed specifically to cover pre-development and development investments required before permanent facilities financing becomes available. This type of financing bridges the gap between initial project planning and final bond closing, allowing schools to maintain momentum on critical facility projects.

Unlike traditional bridge loans that typically last 6-12 months, bridge to bond financing often extends 12-36 months to accommodate the extended timelines required for bond qualification, rating processes, and market timing.

Common Uses for Bridge to Bond Financing

Schools can utilize bridge financing for a comprehensive range of pre-development expenses that are essential for successful facility projects but occur well before bond funding becomes available.

Land and Site Preparation:

Land acquisition and purchase deposits
Site survey work and environmental assessments
Zoning applications and variance requests
Utility connection studies and infrastructure planning

Design and Development:

Architectural design fees and schematic development
Engineering studies and structural assessments
Third-party reports including environmental and traffic studies
Permitting fees and entitlement processes

Pre-Construction Activities:

Construction document development
Contractor selection and pre-construction services
Material procurement and long-lead item orders
Site preparation and infrastructure work

Operational Bridge Needs:

Working capital during transition periods
Pre-opening marketing and enrollment expenses
Staff hiring and training costs
Technology and equipment procurement

Due Diligence and Documentation

Bridge to bond financing involves streamlined underwriting compared to bond financing, but still requires comprehensive project documentation.

Required Documentation:

Detailed project development plans and timelines
Financial projections including bridge and bond scenarios
Professional team credentials and experience
Site control documentation and development approvals

Making the Bridge to Bond Decision

Assessment Framework

Schools considering bridge to bond financing should evaluate their specific circumstances against several key criteria.

Project Readiness Factors:

Clear timeline for bond qualification and market access
Defined project scope and budget requirements
Professional team assembled for development process
Site control and preliminary approvals in place

Financial Capacity Analysis:

Ability to service bridge financing during development
Realistic debt capacity for combined bridge and bond financing
Adequate cash flow projections for construction period
Reserve requirements and working capital needs

Implementation Best Practices

Professional Team Coordination: Successful bridge to bond financing requires coordination among multiple professional advisors including bond counsel, financial advisors, architects, and construction managers.

Timeline Management: Realistic timeline development accounting for both bridge financing requirements and bond market access requirements is essential for project success.

Risk Management: Comprehensive contingency planning for potential delays in bond financing or changes in market conditions helps ensure project completion even if original assumptions change.

Conclusion

Bridge to bond financing provides charter schools with a valuable tool for managing the complex financial requirements of major facility development projects. By covering pre-development costs without depleting operational reserves, this financing approach allows schools to maintain project momentum while preserving financial flexibility.

Success with bridge to bond financing requires careful planning, realistic timeline development, and coordination with long-term bond financing strategies. Schools that approach this financing option strategically can accelerate their facility development while maintaining the financial stability necessary for successful bond financing.

The decision to pursue bridge-to-bond financing should be made as part of a comprehensive facility financing strategy that considers all available options and aligns with the school’s long-term educational and financial objectives.

Charter School Facilities Program Overview

About Charter School Capital

Working exclusively with charter schools, we measure our success by the number of students we serve. Our team works with all sizes – and types – of charter schools to budget and plan for current needs and future growth – whether your school requires operational capital, growth funding, or facilities expansion. We partner with our clients so they can focus on what’s most important – educating students.

Long-Term Lease Financing

Our lease product allows schools to access funding through all stages of growth – from startup to expansion through maturity. Our transparent lease terms mean that there are no artificial incentives to seek refinancing – another great benefit. As a long-term partner, our team carefully evaluates each school’s unique operation to help them determine the revenue that can be committed to supporting facilities.

Benefits of Long-Term Lease Financing

Finances 100% of your total project cost
Retain control of your facilities
Enhancements of existing buildings and ground-up construction
Ensures long term affordability
Tenant improvements included in the financing
Customized to school specifications (blended learning model, traditional, etc.)

Charter School Capital Facilities Program Overview

As part of our ongoing support of charter school growth, our Facilities team assists charter leaders in finding appropriate real estate, providing long-term lease financing as well as managing leases and facilities development. We are building our portfolio specifically with charter school properties in order to service a niche market with niche needs. We currently own 42 school properties in 11 states, more than $350 million in assets.

Financing Approval Criteria

Our experienced team will support you every step of the way and answer any questions you may have.

Experienced school leadership
Proven and consistent track record of operational success
History of good academic performance
Stable or increasing enrollment
Strong community demand (student waitlists, expanding grades)
Sound financial performance
Lease payment target that’s less than 20% of total revenue
A healthy relationship with the school’s authorizer
Solid and engaged Board of Directors

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The Ultimate Guide to Charter School Facility Financing:
Thinking about a new facility for your charter school or enhancing your current one? This guide shares straightforward and actionable advice on facilities planning, financing options, getting approved, choosing a partner, and much more! Download it here.

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Managing charter school finances requires understanding specialized terminology that bridges education and business operations. Whether you’re reviewing budgets, planning for growth, or communicating with board members, fluency in financial language empowers better decision-making and strategic planning.

Core Budget Components

Revenue Terminology

Per-Pupil Funding: The primary funding mechanism for charter schools, calculated based on enrolled students (Average Daily Attendance). This funding typically comes from state allocations and follows students to their chosen schools.

Average Daily Attendance (ADA): The calculation method used to determine funding, based on actual student attendance rather than enrollment numbers. Consistent attendance directly impacts school revenue.

Weighted Funding: Additional funding for students requiring specialized services, such as special education, English language learners, or students from low-income families.

Federal and State Grants: Supplemental funding for specific programs like Title I (schools serving low-income students), IDEA (special education), or E-rate (technology infrastructure).

Expense Categories

Personnel Costs: Salaries, benefits, and payroll taxes for all staff. Typically represents 70-80% of charter school budgets.

Operating Expenses: Day-to-day costs including utilities, supplies, curriculum materials, technology, and professional services.

Facility Costs: Rent, mortgage payments, maintenance, and facility-related expenses. Often represents 10-15% of total budget.

Capital Expenditures: Large purchases like furniture, equipment, and technology that provide long-term value to the school.

Financial Management Terms

Budget Analysis and Planning

Operating Margin: The difference between total revenue and total expenses, indicating whether the school operates at a surplus or deficit.

Cash Flow: The timing of money coming in (revenue) versus going out (expenses). Schools may have positive annual budgets but face cash flow challenges due to timing differences.

Debt Service Coverage Ratio: A measure of the school’s ability to pay debt obligations, calculated by dividing net operating income by debt payments. Lenders typically require ratios above 1.2x.

Working Capital: Current assets minus current liabilities, representing the school’s short-term financial health and ability to meet immediate obligations.

Performance Metrics

Cost Per Pupil: Total expenses divided by student enrollment, useful for comparing efficiency across schools or tracking changes over time.

Instructional Percentage: The portion of budget dedicated directly to classroom instruction, indicating how much funding reaches students versus administrative overhead.

Reserve Ratio: Cash reserves as a percentage of annual operating expenses, typically recommended at 10-15% for financial stability.

Accounting and Compliance

Financial Reporting Standards

Generally Accepted Accounting Principles (GAAP): Standard accounting practices required for consistent financial reporting and auditing.

Fund Accounting: A system that segregates resources into different categories based on restrictions or purposes, common in public education finance.

Restricted vs. Unrestricted Funds: Restricted funds must be used for specific purposes (like federal grants), while unrestricted funds can support general operations.

Audit and Oversight

Annual Financial Audit: Independent review of financial statements and internal controls, required for most charter schools and essential for maintaining authorization.

Compliance Audit: Review of adherence to charter terms, state regulations, and federal program requirements.

Management Letter: Auditor recommendations for improving financial controls and processes, often required by authorizers and lenders.

Strategic Financial Planning

Growth and Expansion

Enrollment Projections: Forecasting student numbers for budget planning, considering demographic trends, market competition, and school capacity.

Scalability Analysis: Understanding how costs and revenues change with enrollment growth, identifying fixed versus variable expenses.

Break-Even Analysis: Determining the minimum enrollment needed to cover all expenses and maintain financial sustainability.

Risk Management

Contingency Planning: Building financial buffers for unexpected expenses or revenue shortfalls, typically 3-5% of total budget.

Scenario Modeling: Analyzing financial impact of different enrollment, funding, or expense scenarios to prepare for various outcomes.

Financial Dashboard: Key performance indicators tracked regularly to monitor financial health and identify trends early.

Practical Application for Charter Leaders

Budget Development Process

Understanding these terms enables more effective participation in budget development, from initial planning through board approval and ongoing monitoring.

Key Budget Cycle Activities:

Annual budget development based on enrollment projections
Monthly financial reporting and variance analysis
Quarterly budget adjustments based on actual performance
Year-end financial statement preparation and audit

Communication and Governance

Financial literacy helps leaders communicate effectively with board members, authorizers, auditors, and potential lenders or partners.

Important Communication Contexts:

Board meeting financial reports and budget discussions
Authorizer compliance reporting and renewal applications
Loan applications and facilities financing negotiations
Community and stakeholder financial transparency

Building Financial Expertise

Developing comfort with financial terminology and concepts is an ongoing process that strengthens charter school leadership and organizational sustainability.

Continuing Education Opportunities:

Professional development workshops on school finance
Collaboration with experienced business managers and CFOs
Board training on financial oversight and governance
Industry conferences and peer learning networks

Understanding charter school finance terminology empowers leaders to make informed decisions, communicate effectively with stakeholders, and ensure their schools operate efficiently while maximizing resources for student achievement.

Charter School Financing: Myths vs. Facts

From funding your growth, managing deferrals, to investment in facilities, get ahead of the game knowing these five charter school financing myths & facts!

MYTH: Charter schools should use their reserves to finance growth instead of looking for outside financing options.
FACT: Using outside financing to facilitate growth can make a charter more financially secure in the long run and pay for continued growth without depleting cash reserves.

MYTH: Growth capital should only be used in the case of state funding delays or deferrals or as a last resort.
FACT: Growth capital is incredibly flexible and can be used for operational growth, program enhancements, technology upgrades, school expansion, etc.

MYTH: Running a charter school is not like running a business.
FACT: A charter school is a business and making smart, informed business decisions will benefit your school’s viability, financial health and overall growth.

MYTH: Bonds are the best way to fund a facility.
FACT: Only 12% of charter schools have accessed bond financing. The process of securing a bond is often time-consuming and can incur hidden fees from audits, trustees and rating agencies.
Source: LISC, Charter School Bond Issuance, 2015

MYTH: Charter schools should own their facilities.
FACT: You’re in the business of educating students, not owning and managing real estate. There are many other financing options that will give you control and security over your facility.

If you’d like to download the PDF version of this infographic, click here.

Charter School Budgeting Best Practices: Don’t Just Survive–Thrive!
Since the opening of Charter School Capital 10 years ago, we’ve reviewed thousands of charter school budgets. Year after year, we see common mistakes many charter schools make when budgeting for their academic year. Hear from charter school finance experts as they give you a breakdown of budgeting best practices to help you have a financially successful academic year. Don’t just survive — thrive!

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Charter schools face multiple challenges from Year 0 inception in establishing the school and a different set of challenges once in operation through their growth. What are the charter school growth strategies that will help your school succeed? What are your plans for charter school replication? How do the challenges faced by charter leaders change as they expand?

Join us for a webinar focused on charter school growth strategies. We’ll feature the challenges schools face during various phases from start-up, expansion through to a mature school as well as highlight best practices schools use to achieve success.

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Speakers:

Marshall Emerson, Co-founder & CEO, I CAN SCHOOLS
Marshall the Co-founder and CEO of I CAN Schools, overseeing seven charters and more than 2,000 students. I CAN began in 2010 and the schools have been one of the country’s most successful charter school concepts in closing the achievement gap for low-income students.

Stuart Ellis, President & CEO, Charter School Capital
Stuart is the Co-founder and CEO of Charter School Capital, the nation’s leading provider of growth capital and facilities financing to charter schools nationwide. The company has provided in excess of $1 billion in support of 500+ charter schools educating more than 500,000 students across the country.

What you will learn:

Best practices for growth and replication
Funding options specific to your growth stage
Lessons learned from charter school leaders

The National Alliance of Public Charter Schools (NAPCS) recently announced their newest campaign, “The Truth about Charter Schools,” where they clear-up common misunderstandings about charter schools.
All of us in the charter industry understand that even though support for charter schools is widespread, there are still myths and misconceptions that create confusion and resistance.
That’s why we’re so excited about the NAPCS’ campaign, and why we’ve decided to support their efforts by tackling some charter school financing myths and facts of our own.
___________________________________________________________________________________________________________________________________
MYTH: Charter schools should use their reserves to finance growth instead of looking for outside financing options.
FACT: Using outside financing to facilitate growth can make a charter more financially secure in the long run, and pay for continued growth without depleting cash reserves.
MYTH: Working capital should only be used in the case of state funding delays or deferrals or as a last resort.
FACT: Working capital is incredibly flexible and can be used for operational growth, program enhancements, technology upgrades, school expansion, etc.
MYTH: Running a charter school is not like running a business.
FACT: A charter school is a business and making smart, informed business decisions will benefit your school’s viability, financial health, and overall growth.
MYTH: Bonds are the best way to fund a facility.
FACT: Less than 10% of charter schools can actually obtain bond financing. The process of getting a bond is often time-consuming, arduous and incurs hidden fees from audits, trustees and rating agencies.
MYTH: Charter schools should own their own facility.
FACT: You’re in the business of educating students, not owning and managing real estate. There are many other financing options that will give you control and security over your facility.
MYTH: The cost of getting financing is too high.
FACT: There is a significant opportunity cost to being inadequately funded and being unable to pay your staff, enhance your programs and enroll more students.
MYTH: The most important factor of getting financing is the interest rate.
FACT: Just like getting a car loan or a mortgage, there are fees and transaction costs hidden in many financing deals. Make sure you’re comparing your total end-cost when evaluating different charter school financing options as well as making an apples-to-apples comparison.
Are there other myths you have to add? Let us know in the comments below!

If the California Charter School Act of 1992 marks the charter school community’s most pivotal legislative victory, it can be argued that California Senate Bill 740 is a close second. However, its 2001 passage was only the beginning, as it paved the way for a triumphant rescue years later.
SB 740 contains two primary provisions. The first provision regulates the actions of non-classroom-based charters. The other creates a facilities grant program for charters serving low-income students—the only program of its kind in California. Though $7.7M was allocated for the grant program, that funding fell victim to budget cuts year after year, requiring extensive lobbying efforts to reinstate it. Branche Jones, Charter School Capital’s California legislative consultant, was instrumental in those efforts from the beginning. “There was always supposed to be $7.7M, but you would end up with $0. We’d have to get Governor Schwarzenegger to put it back in the May budget revision in order to get the money.”
By 2007, the State Speaker’s Office took matters a step further, placing that money in a standalone trailer bill that was ultimately left at the desk. With those funds now off-limits, California charter school stakeholders and supporters came together to take action. From lobbyists in Sacramento to parents from the Camino Nuevo charter school in the Pico-Union district of Los Angeles—the State Speaker’s home district—pressure was brought from all corners of the California charter school community. Eventually, it worked.
Not only did negotiations ensure that the funding was reinstated, but they also resulted in a dramatic increase—from $7.7M to $18M.
And the momentum continued. The following year, in 2008, lobbyists were successful in convincing legislative leadership to improve the way bonding authority was calculated. As a result, existing year-round grant program funding was redirected toward SB 740 as well, adding $20M to the program the first year and $40M thereafter. Today, the program’s funding has climbed to $118M in six years. Better yet, it’s protected as a standalone categorical program.
Looking back, Jones attributes this unprecedented victory to the team effort in place. “For me, the biggest successes aren’t when one or two people are doing it. It’s when the collective body is making it happen. This was one of those unique situations where everybody came together,” he said.

Among the factors that determine a student’s likelihood to attend college, middle school figures prominently. Performance during grades six through nine tends to set in motion a pattern that dictates whether or not a young person will pursue higher education.
In San Bernardino, there is yet another hurdle: the area holds the highest dropout and lowest college attendance rates in the country. New Vision Middle School’s founders recognized the need for a solution and established their charter school in 2009.
As a charter school, New Vision affords students a luxury that its district counterparts often cannot – individualized attention. Principal Javier Hernandez believes making education personal is the key to connecting with students. “The typical middle schools here are easily over 1,000 students, whereas we have 300. Because we are a smaller school, we’re able to know the students. They know us. And we’re able to build a relationship with the students as well as their parents.”
And that relationship ultimately lays the groundwork for a shift in attitude. New Vision students are empowered to take a vested interest in their education, often for the first time, which inspires them to see college as a practical, attainable goal.
For Principal Hernandez, that simple realization lies at the heart of New Vision’s mission. “That’s the thing that we see here with our students—they suddenly see that education is important and want to try and do well in their classes so that they can go to college,” he said.
Considering New Vision’s contribution to the community, it’s hard to imagine life without the school. But, Alex Lucero, its executive director remembers the challenges they faced when opening their doors four years ago.
“We decided to open up in the midst of a California crisis where there were state budget cuts in education and funding deferrals in place. We didn’t know when our state funding was going to hit our bank account, “ he said.
Fortunately, New Vision reached out to Charter School Capital, giving us the opportunity to provide both monetary and informational support—the latter proving a welcome resource for Lucero and his team.
“I’m a double business major, have a master’s in education and have been working in charter schools for several years. But looking at the financial materials didn’t explain anything to me,” said Lucero. “Charter School Capital was able to assist with that.”

Last Friday, August 31, the California legislature adjourned for the year, completing their work on several controversial issues in the 2011-12 legislative session. For charter school supporters and advocates, there were a few pieces of legislation that may affect your interests – specifically those which may affect financing California charter schools. All of the following measures are currently on the Governor’s desk awaiting his signature or veto.
AB 1594 by Assemblyman Eng mandates charters schools to gradually begin to participate in the Free and Reduced meals program if they have eligible students (though non-classroom based charter schools are exempt.) This bill follows a state-wide audit mandated by legislators to determine whether or not charter schools have been participating in this program.
AB 1811 by Assemblywoman Bonilla deals with conversion charter schools and their funding rates. This has been a long-running issue on which legislation is usually proposed every few years. AB 1811 says that once the school converts into a charter school, it cannot receive more funding than it would have gotten if it continued as a traditional public school. Conversion funding rates are an issue for the state, because some policymakers believe that some schools only converted in order to qualify for the higher level of funding (depending on the grade level span) and ultimately receive more financing for California charter schools from the state.
AB 1919 by Assemblywoman Brownley deals with access to student data and the access to that data by the authorizer. Amendments were taken to ensure that the bill complies with FERPA (and ensure the protection of the student’s and parent’s rights).
SB 1290 by Senator Alquist makes reaching pupil growth targets the most important part of charter school renewal from all of the different subgroup targets. The bill is sponsored by the Department of Education and backed by the US Department of Education. The Federal Government claims that the state has to make the change to continue to be eligible for the charter school start-up grant. This leaves to question whether or not the State Board of Education can draft regulations to make the change, therefore making legislation unnecessary.
To view any of these bills in their entire form visit http://www.leginfo.ca.gov/bilinfo.html and type in the bill number in the search bar. For more information about financing California charter schools, visit our blog.

Much of the current education discussion in California today is focused on the upcoming tax increase initiative, Prop 30, and what may happen to funding for California charter schools if the initiative doesn’t pass.
However, the issue that isn’t being discussed – and has an immediate impact on charter schools’ cash flow – is a 21.2% reduction in what schools typically receive during the school year. This will severely impact California charter schools this year, regardless of November ballot results. Schools need to be aware of this general purpose entitlement payment delay and the impact it will have on their budgets.
If Prop 30 passes, this 21.2% reduction is not a cut in funding, but a delay in payment that’s referenced in state law as an “offset.” If Prop 30 passes, it operates like an additional deferral of payments on top of current deferrals already in place. Schools should understand that the 21.2% amount is not taken all at once. Instead, it’s a 21.2% reduction in amounts that otherwise would be paid to schools on a monthly basis. This reduction will come first from money that normally would be transferred to schools by the state. The impact on the amount and timing of the local in-lieu funding may vary by school district or county.
With schools now having to account for an additional 21.2% cash flow reduction of their general purpose entitlement funding, many will be scrambling to rethink their budgets. This delay is roughly one-fifth of a school’s budget that will not be delivered when school administrators are expecting it—and it would be received in late June of 2013 at the earliest.
This cash flow reduction did not seem to be part of the public discussion about the budget during the initial negotiations. As is typical, the detail first appeared in the budget trailer bill that came together very quickly at the end of the session and assumes that the Prop 30 tax increase initiative will pass in November.
While the reduced funding is taking place now, there are several potential scenarios (given these is no mid-year legislation) that can take place contingent upon whether certain initiatives pass or don’t:

If only Prop 30 passes: There should be no additional funding or cash flow reductions or deferrals. The new tax revenues would accumulate in the “Education Protection Account” instead of the State’s General Fund. Funding for California charter schools in the “Educational Protection Account” will be paid next June.
If Prop 30 and Prop 38 don’t pass: There will be a substantial cut in general purpose entitlement funding (the so-called trigger cuts) and more substantial deferrals during the P-1 (first principal apportionment) payment periods. Many are suggesting that the state’s legislature will likely enact mid-year budget amendments to avoid these cuts and deferrals.

If only Prop 38 passes: If this initiative passes, it’s not clear what may happen with funding timing and amounts. There isn’t enough detail in the ballot language currently, so some sort of implementing legislation seems likely.

If both Prop 30 and Prop 38 pass: What happens will depend on how the differences in the two initiatives are reconciled. It’s our understanding that the initiative that receives the most votes will be implemented and the other initiative will not be effective. Anything other than simply implementing Prop 30 would seem to require some legislation and could cause further delays or deferrals, impacting school’s cash flow.

It’s difficult-to-impossible to completely map out all implications of these two tax initiatives, in large part because mid-year budget legislation seems likely under many of the possible scenarios.
The impact of this additional reduction in funding for California charter schools is very real and will undoubtedly be painful. Charter School Capital is moving quickly to inform charter schools so they can begin to plan contingencies and budget for the cash flow shortfalls. School administrators need to be aware, understand the impacts and plan accordingly.
To help educate our clients, we are holding a series of informational webinars specifically to discuss the impact of the state funding reductions on charter schools. This will provide timely and actionable information regarding the impacts of this reduction in funding for California charter schools. Our first webinar is scheduled for Friday, August 24 for Charter School clients. We will hold additional webinars for in the coming weeks. If you would like to receive information, please register here.
UPDATE: To access the presentation from our August 24th webinar, please go
here:https://www.slideshare.net/CharterSchoolCapital/charter-school-capital-california-budget-impact-on-charter-schools or check out the slides below.