SBA 504 Child Care Center Feasibility Study in California

Low cancellations, large buildings

Under SBA 504, the fixed-asset program that works through a certified development company, California child care centers show a distinctive cancellation record: the cancellation floor is only 5.4% for the FY2017 to FY2024 approvals, although the ceiling when undisbursed loans are counted is 10.9%, which shows how much depends on loans still waiting to fund. The cell holds 188 loans and $211.7 million gross. California is 2 in the national order for this program and class, and child care is 7 of 39 in California. A $923,500 median is 1.22x what child care borrowers take under 504 nationally, with typical loans from $479,000 to $1.4 million, and franchise brands hold 12.8%. Home-based care is mixed in, because one industry code spans family homes and centers.

Development companies and counties

Here the lenders are certified development companies. The Mortgage Capital Development Corporation tops the list with 60 loans and $87.8 million, Bay Area Employment Development Company 23 worth $31.0 million, California Statewide Certified Development Corporation 21 worth $22.1 million, Business Finance Capital 21 worth $17.8 million, and Capital Access Group, Inc. 18 worth $17.9 million. SBA's records identify the holder and say nothing of the practices of any company. Los Angeles County has 38 loans, Santa Clara 21, Alameda 20, Orange 13, Contra Costa 12, San Francisco 11, Sacramento, San Bernardino and San Diego 9 each, and Riverside 7. Approvals ranged from 8 in FY2020 to 30 in FY2023.

Charge-offs

Within the 63-loan group funded in FY2017 to FY2021, nothing above 0.00% is charged off, now or at five years. This is a minimum drawn from a small cohort with many loans still open, and it does not promise the future.

What a California child care study under 504 has to test

With 504 there is a property involved, so the study should test the site, the building and the business. Licensing and capacity come first: the number of children each room may hold under state rules, and the staffing that requires. Then demand, meaning families with young children within a realistic commute, incomes that support tuition, and licensed capacity already operating nearby. Cost lines should separate land or building purchase, renovation or construction, playground and safety work, and furnishings, set against a median of $923,500. California entitlements and permits can delay projects, so the schedule should allow for them, and the lower cancellation floor should not be read as a promise that approvals close. Repayment has to work through a slow enrollment ramp, and the appraisal has to back the income.