Child Care Center Feasibility Study in New Jersey

New Jersey's child care center lending matches the class nationally on loan size, with a median of $452,150 that is exactly 1.00x the national median. What New Jersey shows that the national picture does not is weight and structure. The class places 5 of 39 among asset classes in the state, a location quotient of 1.24x says child care claims more of New Jersey's SBA lending than the national pattern, and 29.4% of loans went to franchise units. Over FY2017 to FY2026 the state approved 408 loans for $385.7 million, ranking 9 of 53.

Who lends to New Jersey centers

SBA 7(a) carries 365 of the approvals and SBA 504 carries 43. The middle half of loans spans $159,500 to $1.3 million, wide enough to cover both the purchase of an operating center and a purpose-built facility. TD Bank, National Association holds the most 7(a) loans with 56, but Wells Fargo Bank National Association, with 28 loans worth $39.5 million, and Live Oak Banking Company, with 21 worth $35.2 million, hold the larger tickets; Provident Bank holds 25. Trenton Business Assistance Corporation leads 504 with 24 loans and $27.5 million, with Empire State Certified Development Corporation second at 16. The table follows SBA in naming the present holder of each center loan.

Cancellation is the risk to plan around

The charge-off floor is 2.4% across 166 loans disbursed in FY2017 to FY2021, with 1.8% lost inside five years. Cancellation tells more: at least 14.4% of approvals were cancelled, and up to 15.9% if undisbursed loans are included. Licensing, zoning and fit-out approvals should be cleared or scheduled before approval, since cancellation is the larger of the two risks here. Annual approvals peaked at 48 in FY2019 and fell to 26 in FY2020.

What a New Jersey center study must test

Demand has to be measured as enrolled children by age band against licensed capacity within the drive time, and the counties with the most SBA activity are Essex at 52 approvals, Middlesex at 45, Bergen at 33 and Hudson at 30. Cost testing has to price the build-out to licensing standards, outdoor space included. Debt service coverage depends on the enrollment ramp and on staff ratios, which set the payroll. Where real estate is pledged, the appraisal must value the building for alternative uses as well as for child care. A coding limit runs through every figure: family child care homes share the industry code with centers, so in-home providers and commercial facilities sit in one cell.