Child Care Center Feasibility Study in Tennessee

Larger Tennessee centres, fewer of them

Tennessee child care loans run large: the median approval of $589,000 is 1.30x the national midpoint, and the central half of Tennessee loans stretches from $207,600 to $1.3 million. Measured by location quotient, 0.86x, child care is lighter in Tennessee's SBA book than nationally; it ranks 9 of 39 among Tennessee classes and puts Tennessee 27 of 53 among states on 89 loans and $98.3 million from FY2017 to FY2026. No headline figure is flagged against Tennessee's lending in every class or against child care across the country, which on a cell of this size is a caution about noise as much as a finding.

A 7(a) market with few repeat lenders

SBA 7(a) carried 82 Tennessee loans and SBA 504 just 7. Repeat lenders are few: U.S. Bank, National Association holds 11 loans for $7.2 million, Newtek Bank, National Association 6 for $1.1 million, and Customers Bank 5 totalling $11.4 million. Franchised centres account for 33.7% of loans. Davidson County leads with 14, followed closely by Shelby with 13 and Knox with 10, then Williamson with 8. FY2024 was the peak year by dollars, at 11 loans and $18.9 million.

What the Tennessee floors say

At least 15.5% of Tennessee approvals from FY2017 to FY2024 were later cancelled, and up to 18.3% if undisbursed loans count as cancelled. The 39 loans that funded over FY2017 to FY2021 show no charge-offs yet: Tennessee's rate is 0.00% to date and 0.00% within five years. That cohort is small, just over the 30-loan minimum we require before printing a rate, and open loans can still fail, so the clean record is a floor and not a promise. For a lender the larger tickets have so far repaid; for a borrower, cancellations deserve the closer look.

Because Tennessee loans are large for the class, the study usually supports a purpose-built or substantially renovated centre. Enrolment demand by age group has to be tested against licensed capacity in Davidson, Shelby, Knox or wherever the site sits, and test tuition against what local families can pay. Cost has to cover construction or conversion to licensing standards. Debt service coverage on a loan at or above the $589,000 median needs a credible enrolment ramp and staffing plan. The appraisal should show the property's value beyond child care use, because that is what a lender can recover. Home-based family child care shares this class's code, so it cannot be separated from centres in these figures.