As more people have returned to work, we continue to hear from both businesses and potential employees that access to quality childcare is difficult, if not impossible in some areas. As employers struggle to find employees and demographic trends point to a difficult future the need for childcare will only become more important moving forward.
Despite the cost of childcare, it can be a challenging business. According to some business advisors, the best approach to starting a new childcare business is centered around owning the building where the business operates. While the operating margins can be tight, the building owning childcare operator is constantly building equity in the building as they operate the business and when they are ready to retire, they can sell the building on their way out to help fund their next adventure.
Here is where we can help. Did you know that daycare properties are not considered special purpose properties by the SBA? This means down payments as little as 10% of the total project (add 5% for startups) and fixing 40% of the cost in a long term fixed rate loan. Not to mention our banking partners are much more comfortable at 50% LTV on these deals.
Perhaps if more individuals knew about the low equity requirement of the SBA 504 loan program, it could encourage more individuals to open their own facility. In addition to using the SBA 504 loan program for purchasing (or building) the facility, the loan can also finance the furniture, fixtures and equipment needed to run the business.
In addition to the SBA 504 loan program, there are other helpful programs. The SBA 7(a) loan program is beneficial if there is a goodwill component to the transaction. Also, there are various local programs that can assist with supporting childcare businesses. For example, WomenVenture https://www.womenventure.org/ based out of the Twin Cities offers three different programs from start-up childcare centers to experienced childcare providers. Many Regional Loan funds also look favorably on new childcare businesses to meet their local demand.
Reach out to your local WBD loan officer. They can help come up with a plan on how WBD and other agencies in our market can help with financing more childcare facilities in our communities.
