Financing Child Care in the United States - Ewing Marion Kauffman ...

PUBLIC–PRIVATE PARTNERSHIPS CAPITAL INVESTMENT PARTNERSHIPS
range of issues such as assessing business risk,
estimating revenue and planning facilities. It includes
specialized spreadsheets that are also available on
computer disk.
HOW FUNDS DISTRIBUTED
Loan applications are submitted to Self–Help, which
operates like a bank and administers all aspects of the
loan, including processing payments and working with
borrowers who are having difficulty repaying the loan.
POPULATION SERVED
Self–Help makes loans to early childhood programs of all
types and sizes, including nonprofit, church–based and
proprietary child care and Head Start centers, as well as
large and small family child care homes. Self–Help
primarily meets the needs of child care borrowers who
have the capacity to carry debt but have trouble obtaining
a loan from a commercial lender.
STRATEGIC CONSIDERATIONS
• In 1993, Self–Help examined its small–business
lending and realized that child care was the industry to
which it had made the most loans. After a survey of
child care providers, resource and referral agencies,
and state child care personnel indicated that there was
more than $80 million in loan demand in the child care
industry, the organization decided to provide targeted
loans and technical assistance to these providers. The
effort has been very successful, and demand for child
care loans has grown dramatically in recent years.
• The community development financing strategy used
by Self–Help is an effective way to help child care
programs access capital. It does not, however, lower
the cost of borrowing money.
• Economy of scale is an important factor. Credit union
deposits and many PRIs are small or are available for
short periods of time, and therefore they might not be
a viable source of capital for the long–term loans many
child care operators need. But Self–Help is able to
combine small, short–term investments with other
large, long–term investments that have been made to
its institution. Additionally, Self–Help can package its
loans with loans from other state and federal partners
such as the Small Business Administration, Housing
and Urban Development and the Rural Development
Agency. Self–Help also administers a child care loan
fund for the state’s Division of Child Development,
which is funded with federal CCDBG dollars. Taken
together, these funds provide capital needed to offer
both long– and short–term loans.
• Technical assistance is a crucial element of child
care lending. Self–Help has the capacity and the
commitment to provide intensive technical assistance
to many of its borrowers.
• Self–Help has found the delinquency rate on child care
lending to be higher than it is for other lending, but
actual losses have been minimal. (Loan losses have
represented only two–tenths of one percent of its
portfolio.) Self–Help’s management of the loans has
been critical to ensuring that the funds are repaid. Not
surprisingly, borrowers who provided child care to
middle– and upper–income families had no
delinquency problems, while the majority of those that
aimed for a low–income clientele suffered delinquency
problems. Self–Help also found that for–profit
borrowers had more delinquency problems than
nonprofits.
OTHER SITES WITH SIMILAR STRATEGIES
Most large community development financing institutions
(such as Coastal Enterprises, in Maine) use financing
strategies similar to those described above.
CONTACT
Laura Benedict, Director
North Carolina Community Facilities Fund
c/o Center for Community Self–Help
P.O. Box 3619
Durham, NC 27702
Phone (919) 956 4430
Fax (919) 688 3615
E–mail
laura@Self–Help.org
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