Child Care Center Feasibility Study in Kansas

A mid-ranked state for a class built on large facilities

Child care centers rank 8 of 39 among Kansas asset classes, and 75 loans approved from FY2017 to FY2026, worth $59.7 million, put the state 31 of 53 nationally. A location quotient of 1.03x and a median of $454,000, exactly level with the national figure at 1.00x, tell us Kansas resembles the country here. Requests span $194,400 to $1.0 million across the central half, wide enough to cover a leased classroom conversion at one end and an owned, purpose-built center at the other.

Programs, brands and lenders

Program use splits 58 loans under 7(a) and 17 under 504, and franchise affiliation reaches 28.0% of loans, a high figure that reflects national child care brands operating in Johnson County. Frontier Financial Partners, Inc. tops the 504 list with 7 loans worth $6.5 million, followed by Heartland Business Capital, Inc. with 6 worth $5.2 million. Wells Fargo Bank National Association is the 7(a) lender with five or more loans: 7 loans and $4.7 million. Geography is lopsided: Johnson County has 51 loans, Sedgwick 7, Wyandotte 5 and Barton 3. A Kansas child care lender is nearly always underwriting a Kansas City suburb.

Quiet cancellations, small charge-off floor

Approvals from FY2017 through FY2024 show cancellations of at least 4.9%, with the ceiling identical at 4.9%. Charge-offs to date stand at 2.3% across the 44 loans disbursed in FY2017 to FY2021, while 0.00% occurred inside five years of approval. Both measures are floors, since loans still outstanding can yet fail, but together they describe a class where approved loans usually fund and usually perform. Annual approvals peaked at 13 loans in FY2019 and fell to 3 loans and $3.3 million in FY2023, before FY2026 showed 8 loans and $10.2 million.

Testing a Kansas child care project

Demand for child care is local and regulated, so the study has to count children in the age bands served within a short drive, existing licensed capacity and waiting lists, and the workforce available to staff classrooms. Cost must reflect licensing rules on space per child. Coverage depends on enrollment ramp and tuition, and a sound test runs it at partial enrollment. The appraisal should treat the center as a special-purpose building and ask what it is worth if the operator leaves.

The industry code for centers also holds in-home child care, which means in-home providers cannot be separated from centers, and a few home-based operators sit inside these counts.