Child Care Center Feasibility Study in Massachusetts

Massachusetts child care runs on a smaller loan

Child care lending in Massachusetts runs on a smaller loan than the class nationally. The median Massachusetts child care loan was $223,250, only 0.49x the national median, and that size stands apart, by more than our distinctness margin, from Massachusetts lending across all classes and from child care nationwide. Volume, by contrast, is ordinary: the location quotient of 0.99x puts child care at almost exactly its national share of Massachusetts SBA lending. Massachusetts ranks 10 of 53 states on child care loan count, with 294 approvals worth $168.1 million in FY2017 to FY2026, and child care is 6 of 39 among Massachusetts classes. Half of Massachusetts center loans fall between $75,000 and $500,000, which fits purchases of operating centers and leasehold build-outs more than new purpose-built centers.

The program split stands out too. SBA 504 carried 78 approvals and SBA 7(a) 216, and the 504 development companies hold the largest dollar books: Bay Colony Development Corporation is the current holder of 39 loans worth $29.6 million, Granite State Economic Development Corporation 21 worth $26.2 million and New England Certified Development Corporation 10 worth $9.0 million. Among 7(a) lenders, Eastern Bank holds 46 loans but only $5.1 million, Santander Bank, National Association 19 and TD Bank, National Association 14, while Customers Bank holds 10 worth $16.8 million. Franchised centers make up 17.3%. Middlesex County dominates with 88 approvals, then Essex with 58, Norfolk with 41 and Worcester with 35. Lending has grown, from 29 loans in FY2017 to 47 in FY2025.

High losses on Massachusetts centers

Losses are the sober part of this record. Of the 96 Massachusetts centers whose loans disbursed in FY2017 to FY2021, 8.3% are written off so far, and 7.3% went bad before their fifth year, so Massachusetts center failures have mostly come early. Cancellations took at least 10.1% of the state's FY2017 to FY2024 center approvals, and 14.4% at the ceiling once undisbursed loans are counted. These are floors.

What a Massachusetts child care study must show

Early losses make the opening years the focus of any study. Demand has to be measured as licensed capacity against the children and working families within the center's drive time, and against waiting lists at nearby centers, with Middlesex and Essex very different from Hampden or Barnstable. Cost testing covers the build-out to licensing standards, playground and staffing at Massachusetts wage levels, since staff ratios drive the budget. Debt service coverage has to hold through enrolment ramp-up and with realistic subsidy and tuition mix. When a Massachusetts center buys its building through SBA 504, the appraiser has to value it with an alternative use in mind; for a leased center it rests on the going concern.

One limit applies: family child care homes share the same code and cannot be separated from centers.