New Loan Fund Banks on Better Day-Care Centers : The private project offers funds and expertise to help struggling agencies improve their facilities.

Lead paint chipping off the ramp to a highway bridge has so contaminated the back yard of one day-care center that the children are not allowed outside.

But at Kangaroo’s Pouch, a day-care center in nearby Chelsea, the future looks brighter because of an unusual loan program.

The Child Care Capital Investment Fund has loaned 23 centers in eastern Massachusetts between $1,000 and $100,000 each at 5% interest for renovation, construction or refinancing--reaching more than 1,000 area children so far, director Carl Sussman said.

Since the independent program--which is funded by the Ford Foundation, the United Way, the Hyams Foundation and eight other non-governmental sources--began three years ago, no center in the fund’s $1.1-million portfolio has defaulted.

And a newer program, which combines grants and loans for up to $17,000, is aimed at smaller centers that cannot contemplate major projects but still urgently need to improve their facilities.

Among the centers that have benefited is the North End Union, a settlement house in Boston’s Italian section that has been offering English classes, job counseling and other services for 120 years.

Without a $100,000 loan from the fund, said director Robert G. Dello Russo, “we would have had to close” because of fumes from a wood-refinishing class in its building.

Instead, the center completed a $400,000 renovation of its 102-year-old main building in October. Dello Russo recently showed off revamped classrooms, new fire exits and sprinklers and a renovated kitchen filled with the aroma of a spaghetti-and-meatballs lunch for the children.

Donations have poured into the fund as neighbors hear about the improvements--a bonus that Sussman said he welcomes.

Loan recipients said a key to the fund’s success is the technical help that it offers--whether in finding an architect, programming computers or teaching day-care centers how to budget for debt.

After fund officials helped with refinancing the mortgage so that Kangaroo’s Pouch will own its building twice as fast while keeping monthly payments the same, engineers and architects affiliated with the fund are now helping the center assess new locations.

“This is not free, but it will be cheaper, and they (fund officials) will find all the pieces,” center director Jose Rivera said.

Because they receive barely enough in fees or state subsidies to meet costs, day-care centers often find themselves in cramped and crumbling quarters.

For the same reason, it is especially hard for day-care providers to borrow money. Usually, the result is that centers fall slowly into disrepair, which Sussman said can dampen staff morale, contribute to already-high turnover and reduce children’s enjoyment and parents’ interest.

“If you don’t . . . force yourself to start thinking about it, you will be in the same place 20 years from now,” said Danny LeBlanc, who runs the North Shore Community Action Program in Peabody, Mass. Using a $100,000 loan and $230,000 in grants and reserves, his agency transformed the leaking basement of a former high school into a center for 70 children.

Designed by an architect recommended by the fund, the center includes an indoor sandbox, and each of its classroom doors looks different. Teacher Brenda Dion said children are more relaxed there than in the agency’s older classrooms. And because it is sized for preschoolers--something LeBlanc said took thought, not money--children are happier.

“When they first came in here, they were thrilled they could see themselves in the mirror in the bathroom,” teacher Donna Bamford said.

Staff at the United Way of Massachusetts Bay and the Boston-based Hyams Foundation decided in the late 1980s that starting a loan fund would be the best way to use private money to improve day care locally.

“We saw it as a way to help low-income children, both to give them a step up entering school and to help their parents to become economically self-sufficient because they could then get jobs,” said Beth Smith, executive director of the Hyams Foundation.