Child Care Center Feasibility Study in Michigan

Michigan child care runs on smaller loans

Loan size is what separates Michigan's child care lending. The median SBA loan to a Michigan child care center from FY2017 to FY2026 is $271,850, just 0.60x the national median for centers, and our screen finds it set apart from Michigan's all-class median by more than its margin too. The book itself is sizeable at 240 approvals worth $132.4 million, ranking Michigan 14 of 53 among states and the class 10 of 39 among Michigan classes, yet the 0.64x location quotient shows child care holding a lighter share of Michigan SBA lending than of the national total.

Huntington and the development companies

With a middle half of $100,000 to $655,625, Michigan center loans range from equipment and working capital to buildings, and SBA 504 has 39 of the approvals beside 201 under SBA 7(a). Franchised centers are 15.4% of loans. The Huntington National Bank dominates, holding 59 of the 7(a) loans worth $20.9 million; ChoiceOne Bank holds 17 for $13.0 million, First Children's Finance 12 for $1.1 million, and Bank of America, National Association and Northeast Bank 6 apiece. Among development companies, Michigan Certified Development Corporation leads with 29 loans for $21.3 million, ahead of Great Lakes Commercial Finance at 8 and $2.3 million. Oakland County leads with 60 approvals and Wayne follows with 54, then Macomb with 18 and Kalamazoo with 15.

Cancelled often, charged off rarely

Michigan centers show a split outcome record. At least 15.5% of their FY2017 to FY2024 approvals were cancelled, and if loans not yet disbursed count as cancelled the ceiling is 17.6%. Yet none of the 92 Michigan centers funded across FY2017 to FY2021 is recorded as charged off, 0.00% to date, 0.00% inside the five-year window, floors that may rise as those loans run on. The trend is uneven, with 7 approvals in FY2020, 29 worth $29.8 million in FY2021 and 32 in FY2024 for only $7.8 million.

For a Michigan center, the risk sits before opening rather than after. A feasibility study should test enrolment demand by age band along the routes parents actually drive, against licensed capacity at competing centers and the home-based providers that share this code. Cost must include licensing, classroom ratios, playground and building code work, priced from bids, because a project that cannot reach licensure on budget is one that gets cancelled. Debt service coverage depends on tuition and any subsidy at a realistic enrolment ramp, with staff wages that follow required ratios. Where a Michigan center loan includes the property, the appraisal should show what the property is worth outside child care use.

Family child care homes cannot be pulled apart from centers in the code, so some of these Michigan loans finance care in a provider's own home rather than a stand-alone center.