Child Care Center Feasibility Study in Ohio

Ohio lends small for child care

Ohio approved 500 SBA loans to child care centers between FY2017 and FY2026, for $271.0 million. It ranks 4 of 53 among states for the class, and child care ranks 4 of 39 among Ohio's own classes, with a location quotient of 0.96x, close to the national share. What separates Ohio from its own record and from centers nationally is how small the loans are. The median is $187,650, just 0.42x the class median nationally; the middle half of Ohio loans falls between $50,000 and $650,000.

A median that low usually means working capital, equipment, fitting out leased rooms, or buying a center that already operates, more than new construction. SBA 504 accounts for 63 loans against 437 under 7(a). One bank dominates: The Huntington National Bank holds 204 loans for $67.6 million, far ahead of Telhio Credit Union Inc (21 loans, $4.9 million), KeyBank National Association (17 loans, $13.6 million) and Fifth Third Bank (14). Among certified development companies, Community Capital Development Corporation (17 loans) and Ohio Statewide Development Corporation (14 loans, $13.3 million) lead. Franchise operators account for 21.0% of loans. Franklin County is the clear center of activity with 149 loans, ahead of Cuyahoga at 71, Delaware (37), Hamilton (35) and Summit (31).

The gap between cancellation floor and ceiling

Cancellation after approval reached 13.2% among FY2017 to FY2024 approvals, while the ceiling, which counts loans still undisbursed as cancelled, is 16.2%, a wide spread that tells a lender a fair number of approved projects have yet to draw funds. Of 216 loans disbursed in FY2017 to FY2021, 4.6% have been charged off so far and 2.3% inside five years. That floor is close to Ohio's across all classes but above the child care class nationally. Volume has held in a band, from 40 loans in FY2019 to 65 in FY2021, with 34 in FY2026.

Questions for an Ohio child care feasibility study

A study here has to explain why the project needs more than the typical Ohio loan if it does. Demand should be measured as licensed seats against children in the drive time, with the subsidy share stated plainly. Cost has to include staffing at licensed ratios, which drives margins more than rent does. Run debt service coverage on the enrollment ramp and again on a year when a classroom sits empty. If an existing center is being bought, the appraisal and the business valuation must stand apart, so the lender can see what the real property supports on its own.

A note on the data: home based providers, family child care among them, share the code with centers, and the SBA record offers no way to split them out.