As B2C2 has previously reported, after staffing shortages, access to sufficient and appropriate capital financing is the #1 barrier to childcare expansion. There are immediately available financing tools that childcare providers could leverage in the right situations that are currently rarely used. This blog considers two such financing tools.

Municipal Lending

While municipalities are often in the news for their borrowing, under s.107 of the Municipal Act, they have the power to make grants, including loans and loan guarantees, for any purpose that council considers in the interests of the municipality. The forms these loans can take and the terms on these loans are highly flexible, as courts have generally found this power to be broad where the Council has identified a legitimate purpose.

For centres that are unable to access to meet their capital needs through a mix of CWELLC grants and traditional financing, a municipal loan or guarantee might be just what you need to make up the difference. 

One limitation to this approach is that such loans are subject to general municipal spending limits. However, if the Province were to step in as a guarantor, it would significantly free up the ability of the municipality to lend where it sees the needs.

Community Bonds

Nonprofit corporations, like other corporations, can issue bonds and debentures, including to members of the community, clients, and others who support the nonprofit’s mission. These have been colloquially termed “community bonds”. Thanks to the advocacy of key groups and individuals in the social finance sector, these bonds are exempt from the cumbersome regulations that apply to securities more generally. This means nonprofits have a lot of flexibility in setting their own terms when borrowing this way, including timing and amounts of repayment, what security is offered and more. 

Conclusion: Mission-Aligned Borrowing is More Likely to Make Financial Sense

There is no way to get around the fact that fundamentally these are all borrowing that require repayment. Every centre needs to make its own business plan to ensure such amounts are repayable. However, a centre does not have to limit itself to making business plans that conform to the profit-motivated expectations of traditional lenders who don’t understand how vital your work is to community. Instead, you can build the business plan around your operating realities because you’re working with lenders who fundamentally get the urgent need of what you’re doing.

If you have any questions, feel free to reach out to me at [email protected]