Child Care Center Feasibility Study in Pennsylvania

Pennsylvania centers borrow below the national norm

Pennsylvania's child care borrowers ask for less than their peers elsewhere. The median loan is $329,100, or 0.73x the class median nationwide; it is the median that sets this cell apart from both Pennsylvania's all-asset lending and child care nationally. Loans in the middle of the distribution range from $85,000 to $882,500. The class still matters more here than its loan size suggests. Child care is 4 of 39 in Pennsylvania's class ranking, Pennsylvania ranks 8 of 53 among states, and a location quotient of 1.31x shows centers holding more of Pennsylvania's SBA book than child care holds nationally. SBA approved 428 loans for $311.2 million across FY2017 to FY2026.

SBA 7(a) carried 386 loans against 42 under SBA 504. Two 504 lenders lead: Empire State Certified Development Corporation with 17 loans and $17.3 million, then, at 11 loans and $16.5 million, South Eastern Economic Development Company of Pennsylvania. The 7(a) list divides by ticket size. TD Bank, National Association holds 34 loans for $4.4 million and Manufacturers and Traders Trust Company 30 for $5.1 million, while Wilmington Savings Fund Society FSB's 28 loans reach $29.7 million and The Huntington National Bank's 28 reach $14.5 million. Meridian Bank adds 13. Franchised centers account for 22.7% of loans.

Floors and a rising pipeline

Cancellation after approval is 12.6% of FY2017 to FY2024 approvals, a floor, and 14.2% with undisbursed loans counted. The FY2017 to FY2021 disbursement cohort holds 153 loans; 2.6% of them have been charged off so far and 2.0% within five years. Lending has been climbing, from 30 loans in FY2020 to 63 loans and $55.5 million in FY2025 and 55 loans and $54.0 million in FY2026, with dollars growing faster than the count. Those recent loans have no performance history yet.

Testing a Pennsylvania center before closing

The study for a Pennsylvania center has to show that tuition and any subsidy income will carry the debt. Philadelphia with 95 loans, Montgomery with 49, Allegheny with 40 and Chester with 34 lead the lending, so demand has to be built from the licensed capacity and the young families within reach of the site. Cost covers the lease or purchase, classroom fit-out and licensing inspections. Debt service coverage should be run at the enrollment a new or acquired center can actually reach in its first year, with teacher wages at the going rate. Where the loan buys a building, the appraisal must look at child care sales and at the property's fallback use. One limit on the figures: family child care homes and centers share a single code, so the two cannot be told apart.