SBA 504 Child Care Center Feasibility Study

Child care centers borrow bigger under 504

SBA's 504 program approved 1,959 child care loans from FY2017 to FY2026, $2.02 billion in all, and the size of the typical loan is what sets the record apart. The 504 child care median is $759,000. The middle half of these child care loans runs from $343,500 to $1.5 million.

Franchised operators hold 21.2% of the loans. Florida Business Development Corporation holds 141 child care loans worth $153.7 million, Florida First Capital Finance Corporation, Inc. 129 worth $149.3 million, and The Mortgage Capital Development Corporation 77 worth $113.1 million; Empire State Certified Development Corporation has 68 child care loans and Capital Certified Development Corporation 64. Florida leads with 253 loans, then California with 188, Texas with 170, Illinois with 109 and Georgia with 92. Annual approvals grew from 155 loans and $114.9 million in FY2017 to 270 loans and $274.2 million in FY2022, and FY2025 brought $288.6 million on 213 loans.

Few failures, but approvals that slip

Funded centers have rarely failed. 0.14% is the charge-off floor for the 741 child care loans funded in FY2017 to FY2021; measured at five years, the rate is again 0.14%. Cancellation is the larger exposure for a borrower: at least 12.5% of child care approvals from FY2017 through FY2024 were cancelled, and the figure could reach 18.6% if the approvals still waiting on disbursement cancel too. The distance between those two numbers is the share of center approvals from those years that had not yet disbursed when SBA's data was cut.

What a 504 child care study must show

A feasibility study for a 504 child care center has to prove enrollment, not assume it. That means counting the young children and working parents within a realistic drive of the site, mapping the licensed capacity of competing centers and their waitlists, and showing how much tuition will depend on state subsidy, with its payment timing. Cost has to include building to licensing standards, the outdoor play area, the kitchen and the furnishings a licensing inspector will check. Debt service coverage should be tested through an enrollment ramp, with payroll set by the staff ratios the state requires. The appraisal is the hard part, so the study should support stabilized enrollment and the income the appraiser relies on. A note on the data: the industry code that holds centers also holds family child care homes, so in-home providers are mixed into these 504 figures.