Child Care Center Feasibility Study in Colorado

Colorado child care loans run large

Colorado's child care borrowers take some of the largest SBA loans in their class. The median of 202 approvals from FY2017 to FY2026 is $816,650, 1.81x the typical center loan nationwide, and it is the gauge on which Colorado parts, beyond our margin, from Colorado lending across every class and from centers countrywide. Half of all Colorado approvals fall between $348,250 and $2.0 million, and gross dollars reach $274.6 million. Loans of that size buy or build the center itself, not just equipment and a lease.

The program mix confirms it: SBA 504, built for owner-occupied real estate, carried 45 of the approvals, and SBA 7(a) the other 157. B:Side Capital is the leading holder of Colorado's 504 child care loans with 30 worth $41.5 million, ahead of Preferred Lending Partners with 7 and Mountain West Small Business Finance with 5 worth $8.4 million. On the 7(a) side, Live Oak Banking Company holds 15 loans worth $34.9 million, PNC Bank, National Association 7 worth $21.0 million and Wells Fargo Bank National Association 9 worth $17.5 million, while the 12 held by The Huntington National Bank and the 9 held by U.S. Bank, National Association are smaller. Franchise brands account for 37.1% of loans, so many Colorado borrowers are opening a branded early education school built to a prototype. The class is underweight relative to the nation, with a location quotient of 0.77x, a state rank of 18 of 53 and a rank of 10 of 39 within Colorado.

Clean outcomes so far

For a lender the Colorado record is reassuring to date. Colorado's 83 center loans funded in FY2017 through FY2021 record 0.00% charged off and 0.00% lost within five years, though these are floors and many of the loans are young. Colorado centers approved in FY2017 through FY2024 saw 6.9% cancelled, a modest floor, and 9.2% at the ceiling with undisbursed Colorado loans included. Volume peaked at 36 approvals in FY2023 and fell to 10 in FY2026.

What a Colorado child care study has to test

A loan near the Colorado median puts the building, not a lease, at the center of the credit, so the feasibility study has to work harder than for a leased center. Demand means licensed Colorado seats set against children of care age within a realistic drive, with competing centers counted by capacity; Jefferson County alone holds 50 approvals, and Arapahoe, Denver and Douglas 25 each. On cost, the study prices construction that meets licensing rules, outdoor play areas and staff ratios at current Colorado wages. Debt service coverage has to survive an enrollment ramp, with tuition tied to what families in the trade area pay now. The appraisal must address a special purpose building and say what it would bring from a buyer outside child care. One limitation: SBA's code for centers also covers in-home care, so some Colorado family child care homes may be counted here alongside centers.