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SBA 7(a) loans for daycare
Most business owners who are looking for SBA daycare business loans because they require more funds opt for the SBA 7(a) loan. This is the most widely used loan program of the SBA that provides up to $5 million of capital for small businesses with repayment terms stretching up to 25 hours.
These fixed-rate loans can have interest rates ranging from 4.5 – 5.5% and they tend to vary by lender so it’s always best to shop around for the best rate. It tends to vary based on the amount of the loan, the down payment offered and whether collateral is put up as well.
Daycare center owners can use these loans to cover expenses related to construction or acquiring new premises, buying out a partner, meeting working capital requirements, and more.
Here’s the complete list of our top SBA lenders for daycare SBA loans:
| Rank | Bank | City | State | # of Loans | Avg Loan $ | Avg Interest |
|---|---|---|---|---|---|---|
| 1 | The Huntington National Bank | Columbus | OH | 34 | $229,165 | 6.9% |
| 2 | Readycap Lending, LLC | Berkeley Heights | NJ | 25 | $604,244 | 7.0% |
| 3 | Live Oak | Wilmington | NC | 14 | $2,920,143 | 5.6% |
| 4 | TD Bank | Wilmington | DE | 13 | $256,231 | 8.9% |
| 5 | Wells Fargo | Sioux Falls | SD | 13 | $1,122,877 | 6.8% |
| 6 | Harvest Small Business Finance | Laguna Hills | CA | 12 | $680,775 | 6.8% |
| 7 | Newtek Small Business Finance | Lake Success | NY | 12 | $458,708 | 7.0% |
| 8 | U.S. Bank | Cincinnati | OH | 12 | $241,383 | 6.9% |
| 9 | Customers Bank | Phoenixville | PA | 11 | $1,975,582 | 5.3% |
| 10 | First Bank of the Lake | Osage Beach | MO | 9 | $1,129,067 | 6.9% |
Looking for a daycare franchise? The Federal Reserve’s interest rate hikes have had an impact on child car business loans, as very few daycare franchises have been financed with SBA loans this year but some deals are still getting done with top franchises (>2 loans displayed):
| Rank | Daycare Franchise | # of Loans | Avg Loan | Avg Interest | Avg Term |
|---|---|---|---|---|---|
| 1 | The Goddard School | 11 | $2,560,100 | 8.5% | 188 |
| 2 | The Learning Experience | 5 | $1,198,080 | 10.0% | 156 |
| 3 | Primrose Schools | 4 | $1,487,350 | 8.6% | 120 |
| 4 | Lightbridge Academy | 3 | $1,573,000 | 9.4% | 124 |
Typical daycare business loan terms
Loan term: 25 years if real estate is included; 10 years without real estate
Interest rate: 9 – 11%
Minimum annual cash flow: 9% of loan amount with real estate; 15% without real estate
For example, an SBA loan for daycare of $1,000,000 will need to generate at least $130,000 in annual profits (revenues – expenses) to cover the loan payments if the loan covers mostly real estate.
Daycare industry overview
The child care industry in the United States has expanded rapidly over the past decade. Since it has become much harder to run a household on a single income, the percentage of children being placed in daycare centers continues to rise as often both parents need to work full-time. Analysts predict that 58% of working parents in the United States rely on childcare centers. Americans with children spend approximately 10% of their household income on child care. The entire child care industry in the United States is estimated to be worth over $54 billion.
These stats highlight that new small business owners who want to open a daycare can expect steady demand for their services as parents in the US are only expected to rely more on child care services in the years to come. However, it can often be difficult to obtain a business loan for a child care center, particularly from conventional banks, who may not be that willing to sanction a loan for a business in this industry.
Benefits of owning a daycare business
Owning a daycare business can be an incredibly rewarding and fulfilling experience on a personal level. Many business owners who are in this industry feel a lot of pride in nurturing and taking care of children as they contribute to the growth and education of future generations.
Child care is an essential service for people in the workforce. This means that daycare owners can expect sustained demand for their services. There will always be parents who require care for their children when they’re at work. As it stands, 58% of working parents with children aged 5 years or under use center-based child care options. Such assurance of continued demand is hard to come by in most industries.
How to start a daycare with no money
This is the first question that a lot of people who want to enter this industry ask but unfortunately, it’s not within the realm of possibility. Very few are liquid enough to set up a daycare center without having to obtain financing. The vast majority will require a business loan for a child care center to get their business up and running.
Daycare business loans and grants can be difficult to come by. The terms and rates on most small business loans offered by banks and other financial institutions can often make it prohibitively expensive to even get your business off the ground. Fortunately, there are great SBA daycare loan options that can help you fulfill your dream of running a daycare.
SBA Daycare Business Loans
Compared to a conventional loan, there are several benefits of opting for an SBA daycare loan. Since these loans are guaranteed by the Small Business Administration, banks and lenders are more willing to sanction loans and thus you can obtain financing at lower interest rates with extended repayment periods.
Depending on the size and type of daycare business you run, whether it’s a small local daycare or a new location of a top daycare franchise, several SBA loan options can help you obtain the financing that you need to start or expand your daycare business.
SBA Express loans for daycare
SBA Express Loans are a great option if you wish to receive expedited funding. Up to $350,000 can be obtained at attractive interest rates either as a term loan or line of credit. Much like SBA 7(a) loans, the funds obtained through an Express Loan can be used for a wide variety of purposes.
This includes but is not limited to purchasing an existing or building a new daycare, meeting long-term and short-term working capital requirements, acquiring equipment and even refinancing existing business debt.
Repayment terms depend on the type of financing you choose and what you do with it. Term loans can be repaid in up to 10 years while loans for real-estate purchases can be paid back in up to 25 years. The biggest benefit for business owners is the expedited processing as the SBA strives to process lender-approved applications within 36 hours.
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