Child Care Center Feasibility Study in Iowa

A 504-leaning market with small tickets

Iowa child care lending is notable for how it is financed. Of 69 loans approved between FY2017 and FY2026, worth $38.0 million, the 504 program supplied 27 and 7(a) supplied 42. Loans are modest: the median of $278,000 is only 0.62x the national median for the class. Iowa is 34 of 53 in the state table for child care, the sector places 6 of 39 among Iowa asset classes, and the location quotient of 1.03x says the sector holds almost exactly its national weight. Median, cancellation and charge-off are not flagged against the state or the class nationally, so the page stands on its program mix and lender record.

Lenders and geography

Iowa Business Growth Company is the one development company in the cell with 5 or more loans, holding 13 loans and $7.3 million, which is the bulk of the 504 activity. No 7(a) lender reaches that listing threshold, so 7(a) child care loans are spread across many banks. Franchising is 8.7% of loans. Half of approvals fall between $123,000 and $685,100. Polk County accounts for 26 loans, far ahead of Linn at 6, Warren at 5 and Dallas at 4, so one county supplies the largest part of the evidence.

Volume over time

Lending ran at 5 to 11 loans a year from FY2017 through FY2024, peaking at 11 loans and $6.3 million in FY2021, with FY2023 contributing $8.5 million across 7 loans, the largest dollar year. The latest year recorded just 1 loan and $253,000.

Floors for cancellation and loss

Cancellation has a floor of 9.7% across files approved from FY2017 through FY2024, and counting undisbursed loans changes nothing, so the ceiling is also 9.7%. Among 38 loans in the earliest funded cohort, the written-off share is 0.00% so far and 0.00% inside five years. Open loans may still turn, so both are minimums.

What a study has to test

A child care feasibility study in Iowa has to start with licensed capacity and enrolment: how many children under school age live within a short trip, how many slots competitors already offer, and how many are filled. Staffing ratios drive the cost base, so the pro forma must show teacher wages against tuition at each age group. A project near the median ticket suggests a leased or converted space; a purchase or build near the top of the range needs the 504 structure and a larger equity check. Debt service coverage should be shown through a lease up that fills rooms gradually. The appraisal will test whether the building could be re-used, since a licensed centre is a special purpose property.

A coding limit

In-home family child care shares the industry code with centres, so the record cannot separate the two.