Child Care Center Feasibility Study in Utah

Utah child care: larger loans, thinner volume

Utah's child care loans are a bit larger than the class nationally, but child care takes a smaller share of Utah's SBA lending than it does elsewhere. The median Utah loan was $481,500, 1.07x the national median, and the location quotient is 0.69x, even though child care still ranks 10 of 39 among Utah classes. Utah ranks 21 of 53 states for child care loans, with 132 approvals worth $87.8 million from FY2017 to FY2026. Utah's median and its cancellation and charge-off rates each fall short of our distinctness margin against Utah's all-asset record or child care nationally; what marks the cell is a sizeable ticket and a strong 504 share.

SBA 504 carried 43 of Utah's approvals and SBA 7(a) 89, which points to many centers buying or building their own space. The middle half of loans runs from $173,500 to $853,500. Franchise concepts account for 5.3%, so most centers are independent. Local credit unions lead the 7(a) side: Mountain America FCU holds 13 Utah center loans worth $5.3 million and America First Federal Credit Union 12 worth $7.5 million, followed by Zions Bancorporation, National Association with 9, U.S. Bank, National Association with 7 and Live Oak Banking Company with 5. Salt Lake County leads with 57 approvals and Utah County has 30, with Davis at 15 and Weber at 8. FY2025 was the strongest year, with 17 loans for $15.3 million.

Losses arrive late, cancellations do not

Utah cancelled at least 11.1% of the center loans it approved in FY2017 through FY2024, and 13.0% at the ceiling when loans still undisbursed are added. Utah charge-offs are low: Utah lenders have written off 1.7% of the 59 center loans disbursed over FY2017 to FY2021, while Utah's five-year rate stands at 0.00%, so each Utah loss on record appeared only after year five. Both rates are floors.

What a Utah child care study should test

For a Utah center, demand testing means licensed slots against young children and working parents within the center's drive time, read separately for Salt Lake, Utah and Davis counties and for smaller markets such as Cache, along with competing centers and their waiting lists. Cost testing covers land or purchase price, construction to licensing standards and staffing. Debt service coverage needs to be shown at a realistic enrolment and through the ramp-up, then tested again for later years, because Utah's losses came after the fifth year. The appraisal matters most for Utah's 504 projects, since few buyers want a purpose-built center without its operator, and a loan near $853,500 needs a value that stands on its own.

A coding limit applies here: family child care homes and centers share one code and cannot be separated.