Access to Capital for People of Color: Identifying Barriers to Charter School Facility Financing

1. Access to Capital for People of Color: Identifying Barriers to Charter School Facility Financing

2. Research Initiative Issue: Charter schools are educating a vast number of our nation�s students of color, but the charter school leadership is disproportionately Caucasian/White. Objective: Develop recommendations to charter school leaders, charter support organizations, funders and lenders that will strengthen access to capital for minority led schools. -Provide brief intro to SH�s interest . . . Self-Help�s mission is creating and protecting ownership and economic opportunity for people of color, women, rural residents and low-wealth families and communities. -Inspired by the work of the National Alliance Diversity Task Force -We are currently in initial diagnostic phase -Provide brief intro to SH�s interest . . . Self-Help�s mission is creating and protecting ownership and economic opportunity for people of color, women, rural residents and low-wealth families and communities. -Inspired by the work of the National Alliance Diversity Task Force -We are currently in initial diagnostic phase

3. Defining a Minority Led Charter School �Minority led� schools fit at least one of the following: Minority Founder Majority of Board Minority Minority Board Chair Minority School Leader (financial & hiring decision-maker) Our research included 61 minority led charter schools, of which 79% were African American, 20% were Latino, and 0.02% were Asian American *Definition developed by Dr. Abdin Noboa, President of Innovative Consultants International, through his work with the National Alliance for Public Charter School�s Diversity Task Force *Minority is defined as members of US Census Bureau race categories (White, Black/African American, American Indian/Alaska Native, Asian, Native Hawaiian/Other Pacific Islander, Other) and anyone identifying as Hispanic/Latino -Highlight where the definition came from -Speak to the limitations of the definition (e.g. through you and Laura assessing the portfolio you only highlighted 12 million of SH�s loans as being to minority-led schools, but according to this definition, 37 million of our loans are to minorities . . . Is not always consistent who is the true leader/decision maker/dynamic leader at the school may have majority latino board, but white school director who is actually driving the decision-making process)-Highlight where the definition came from -Speak to the limitations of the definition (e.g. through you and Laura assessing the portfolio you only highlighted 12 million of SH�s loans as being to minority-led schools, but according to this definition, 37 million of our loans are to minorities . . . Is not always consistent who is the true leader/decision maker/dynamic leader at the school may have majority latino board, but white school director who is actually driving the decision-making process)

4. Research Method Analysis of CDFI Charter School Loans Self-Help, NCB Capital Impact, Illinois Facilities Fund & LISC Interviews with minority led charter schools and key observers 12 Schools: 9 funded, 2 not funded, 1 funded once & not funded once 2 Key Observers State Education Agency Charter School Office Education Management Organization Interviews completed by OpenSource Consultants -Brief overview of the methodology � just basically what is on the slide-Brief overview of the methodology � just basically what is on the slide

5. Minority Loans (#) -Highlight: While this does not necessarily look like horrible results, need to take into consideration that at this point we only have data from 4 CDFIs who are all committed to serving minority and low-income students through their lending. -I would also highlight the small sample size we are working from . . To say this gives some first good initial data, but we need more data to get better feel for lending industry as a whole (traditional banks and bond market)-Highlight: While this does not necessarily look like horrible results, need to take into consideration that at this point we only have data from 4 CDFIs who are all committed to serving minority and low-income students through their lending. -I would also highlight the small sample size we are working from . . To say this gives some first good initial data, but we need more data to get better feel for lending industry as a whole (traditional banks and bond market)

6. Minority Loans ($)

7. Loan Details Analysis Highlights: -Strong-Minority Led schools (make sure to reference back to Dr. Noboa�s defintion) have the lowest average loan size -Minority-Led schools getting less money lent per student -Differences in DSC Ration and -Differences in LTVHighlights: -Strong-Minority Led schools (make sure to reference back to Dr. Noboa�s defintion) have the lowest average loan size -Minority-Led schools getting less money lent per student -Differences in DSC Ration and -Differences in LTV

8. School Details Analysis Highlight: -Minorities, are they being held to higher standard? . . . Seems more minority-led are meeting AYP at time of origination of the loan . . However, to give data context we have limited sample size (70 loans) and only AYP data from 2002-2003 -Board/Staff Business Expertise . . . 100% for white-led vs. 43% for Minority-Led vs. 30% for Strong Minority-led schoolsHighlight: -Minorities, are they being held to higher standard? . . . Seems more minority-led are meeting AYP at time of origination of the loan . . However, to give data context we have limited sample size (70 loans) and only AYP data from 2002-2003 -Board/Staff Business Expertise . . . 100% for white-led vs. 43% for Minority-Led vs. 30% for Strong Minority-led schools

9. Loan Size Analysis

10. Urban v. Rural $Lent per Student Highlights: -Remember on general overview slide you saw that minority-led schools were receiving less dollars per student than white-led schools . . We broke out to account for urban vs. rural dollars/student they get from state and local government -Context: only 70 loans in pool size and only looking at 6 states and D.C.Highlights: -Remember on general overview slide you saw that minority-led schools were receiving less dollars per student than white-led schools . . We broke out to account for urban vs. rural dollars/student they get from state and local government -Context: only 70 loans in pool size and only looking at 6 states and D.C.

11. Interview Findings Provide better technical assistance Business trainings for minority leaders Handbook Increase awareness of loan officers Structural racism, personal bias, unique context of minority school leaders Projected Revenue vs. Historical Requested lenders assess projected revenues, not just historical, especially for start-up charter schools -Provide technical assistance to get us where we need to be -Unique context � less financial experience and leverage, don�t� have relationships with financial institutions-Provide technical assistance to get us where we need to be -Unique context � less financial experience and leverage, don�t� have relationships with financial institutions

12. Interview Findings Denial or limited understanding of racism as factor Observers and Charter School Leaders provided alternate reasons for difficulties . . . Charter schools in general are not supported; harder for small schools, urban schools, new schools Observers and Charter Schools Leaders more willing to talk about racism in the abstract vs. personal experiences �Reality of life in America.� �Every charter school/operator is treated equally.� -Open Source reported that interviewees seemed much more comfortable speaking about racism in the abstract vs. their own personal experience-Open Source reported that interviewees seemed much more comfortable speaking about racism in the abstract vs. their own personal experience

13. Potential Next Research Steps Further review of Small Business Community�s examination of minority access to capital Lender Survey CDFIs, Traditional Banks, Bonds Charter School Leader Survey Larger Survey Pool including both white-led and minority-led charter schools Expand Research to include Grant Capital Collect data from traditional banks and bond market -Currently reaching out to other lenders and research institutions (Milken Institute, Woodstock Institute) -Completing thorough literature review of findings and work by the small business community to increase minority small business ownership and access to capital -Lender Survey � Would like to do larger survey including traditional banks and bond market to assess lender attitudes and thoughts about structural racism in the lending process -Charter School Leader Survey � Would like to do at potentially national conference or through mail to get more data concerning the perspective of both minority and white-led charter schools concerning access to capital for minorities -Would also like to examine access to grant capital for minority-led schools (e.g. could use AIA (anonymously of course) as example of the issue here -Expand portfolio data analysis to get better representation of lending industry as a whole-Currently reaching out to other lenders and research institutions (Milken Institute, Woodstock Institute) -Completing thorough literature review of findings and work by the small business community to increase minority small business ownership and access to capital -Lender Survey � Would like to do larger survey including traditional banks and bond market to assess lender attitudes and thoughts about structural racism in the lending process -Charter School Leader Survey � Would like to do at potentially national conference or through mail to get more data concerning the perspective of both minority and white-led charter schools concerning access to capital for minorities -Would also like to examine access to grant capital for minority-led schools (e.g. could use AIA (anonymously of course) as example of the issue here -Expand portfolio data analysis to get better representation of lending industry as a whole

14. Potential Outcomes Develop pipeline of minority loan officers Produce cultural competency curriculum for lenders Establish �Capital Link� to assist minority led charter schools access capital Create growth fund to provide financing to successful minority led schools to open additional campuses Raise credit enhancement funds for minority-led/low wealth schools -These are potential outcomes that SH would like to see come . . . To work to close the access to capital gap that exists for minority-led charter schools and support the growth of minority leaders within the charter school movement-These are potential outcomes that SH would like to see come . . . To work to close the access to capital gap that exists for minority-led charter schools and support the growth of minority leaders within the charter school movement

15. Questions?