Child Care Center Feasibility Study in New York

Far below the national median

New York's child care loans are small. The median is $150,000, just 0.33x the national median for child care centers, and that gap is what separates this cell from both New York's all-asset SBA lending and the class across the country. Half of all approvals fell between $50,000 and $486,750. Over FY2017 to FY2026 the state approved 480 loans for $240.9 million, ranking 7 of 53 states, with a location quotient of 0.78x and the class 8 of 39 within New York.

Small loans fit the program mix: 436 came through SBA 7(a) and 44 through SBA 504. They also fit the counties. Kings holds 82 approvals, the Bronx 49 and Queens 47, with Suffolk and Nassau next at 43 and 41. The small median is consistent with leased space rather than owned buildings in the boroughs, though the files do not record which. Volume has risen from 22 approvals in FY2021 to 67 in FY2026, worth $32.1 million.

Late losses in a small-loan book

The charge-off record needs careful reading. Of the 180 New York center loans funded in FY2017 through FY2021, charge-off has already reached 7.2%, against only 1.1% before the fifth anniversary of approval. Most of the loss in this cohort, then, came after year five. For a lender, that argues against judging a New York center loan on its early payment history. For a New York borrower, the lesson is that enrollment, staffing and lease renewals have to hold well beyond the opening years. Cancellation sits at a floor of 11.0% for New York center approvals made in FY2017 through FY2024, and at 12.7% as a ceiling.

TD Bank, National Association is the current holder of the most loans, 78 for $19.2 million. Manufacturers and Traders Trust Company holds 35 worth only $2.3 million, a book of very small loans, while JPMorgan Chase Bank, National Association holds 33, and ESL FCU and Northeast Bank 21 each. Empire State Certified Development Corporation holds 35 New York center loans under 504, for $31.5 million. Franchise operators make up 11.0% of loans.

What a New York center study must establish

A feasibility study for a center here has to show that enrollment can carry the debt at a loan size that leaves little slack. Demand means counting licensed seats against families within reach of the site. Cost means the fit-out that a licensing inspection will require. Coverage has to be tested across the years after opening, given where the losses fell, and an appraisal for a leased center will rest on the business rather than the real estate. The class cannot split family child care homes from centers, because in-home care shares the same code, so some of the smallest loans may belong to home-based providers rather than centers.