1 / 16

Financing Capital Assets: An Array of Options

Financing Capital Assets: An Array of Options. Kate Barr, Nonprofits Assistance Fund Steve Fenlon, Midwest Healthcare Capital. Kate Barr, Minnesota Primary Care Loan Fund a program of Nonprofits Assistance Fund Loans for working capital and bridge funds for health care organizations in MN

zeal
Download Presentation

Financing Capital Assets: An Array of Options

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Financing Capital Assets:An Array of Options Kate Barr, Nonprofits Assistance Fund Steve Fenlon, Midwest Healthcare Capital

  2. Kate Barr, Minnesota Primary Care Loan Fund a program of Nonprofits Assistance Fund Loans for working capital and bridge funds for health care organizations in MN Support from Robert Wood Johnson Foundation, Otto Bremer Foundation, Medica Foundation, The Minneapolis Foundation Steve Fenlon, Midwest Healthcare Capital Discount tax-exempt financing for Minnesota nonprofits Represents borrowers 18 years experience Presenters

  3. Capital projects use many sources • Grants and contributions • Bonds • Loans and loan guarantees • Bridge financing • Program-related investments • New Markets Tax Credits

  4. Selecting the right financing tools • Project size and complexity • Availability of grant funds • Availability of local or targeted funds • Operating budget and cash flow available • Flexibility needed for repayment terms • Project timeline and time available to arrange financing

  5. Bonds • Debts issued by government entity • Tax-exempt issues • Eligibility for tax-exempt treatment • Bond repayment from project or organizational cash flow – revenue bond • Rates and terms reflect risk of the project • Require a government agency to issue, bond underwriter, and legal counsel

  6. Bank direct bonds • What is a bank placement note • Financing multiple projects – in multiple locations • Initiating tax-exempt financing • Restriction for tax-exempt financing - fixed assets • When not to use tax-exempt financing • Determining and evaluating the costs associated with tax-exempt financing

  7. Loans and loan guarantees • Bank loans are often simple to negotiate and cost effective • Bank considerations in financing: • Debt service coverage • Net asset/equity balance • Liquidity and cash reserves • Collateral value • Bank loan capacity – legal lending limit

  8. Loans and loan guarantees • Loan guarantee programs • Assures the bank of repayment in case of default • Guarantor will review for risk and program fit • Local, state and national guarantee programs • Direct loan programs • Local economic development agencies • Minnesota Primary Care Loan Fund • Bridge loans • Short-term loan to bridge timing for funds

  9. Program-Related Investments • PRIs are loans from foundations that support a charitable project as the primary goal • PRIs typically $100,000 – 400,000 • PRIs are generally unsecured with low or no fees. PRIs earn interest for the foundation but are not intended primarily as an investment • Foundation evaluates financial information carefully for quality of planning and repayment ability.

  10. Program-Related Investments • 1990 – 2001, foundations advanced 2,900 PRIs totaling $1.7 billion • PRIs made 1998 – 2001 by field of service:

  11. Program-Related Investments • Most active foundations for PRIs: • John & Catherine T. MacArthur Foundation • The Ford Foundation • Otto Bremer Foundation • 1998 – 2001, 65 PRIs totaling $14.9 million • Robert Wood Johnson Foundation • Have advanced $35 million in PRIs for facilities and loan pools • Other foundations make occasional PRIs

  12. Financing Case Study – Example A Community clinic – renovation of clinic facility to improve appearance and work flow, upgrade phones and network, and add exam rooms. Total cost = $600,000 Sources of funds: • Foundation grants $ 125,000 • Board-led fundraising 25,000 • Local government loan 75,000 • Nonprofit loan fund (MPC) 75,000 • Bank first mortgage 300,000 • Total sources $ 600,000

  13. Financing Case Study – Example B Community health clinic completed expansion of main clinic building with expansion of dental and health education – total cost $ 5 million Sources of funds: • Foundation grants $ 1,100,000 * • Government grants 600,000 * • Local government loan 100,000 • Foundation PRI 400,000 • Bond 2,800,000 ** • Total sources $ 5,000,000 * Bridge loan from MPC for $500,000 used because of timing of grant funding ** Interim construction loan obtained based on bond commitment

  14. New Markets Tax Credits • New program administered by the US Treasury Department provides tax credits to investors for community development projects. • Projects include community facilities such as healthcare, day care and charter schools, and economic development projects. • Most useful in large projects because of the legal and underwriting costs. • Tax credits are allocated to designated organizations that create investment vehicles known as Community Development Entities (CDEs). Many economic development agencies are involved with NMTC.

  15. Terms and Conditions • Interest rate • Fees • Closing costs • Repayment terms • Prepayment options • Covenants • Restrictions

  16. Financing Capital Assets • Minnesota Primary Care Loan Fund • a program of Nonprofits Assistance Fund • Kate Barr, Executive Director • 612/278-7182 • www.nonprofitsassistancefund.org • Midwest Healthcare Capital • Steve Fenlon, Principal • 651/455-8300 • mhealthcap@aol.com

More Related