SBA 7(a) Child Care Center Feasibility Study

Child care's main SBA channel

Child care operators drew 8,128 loans from SBA's 7(a) program over FY2017 to FY2026, $6.75 billion of gross approvals. In short, the 7(a) child care record and the child care class are close to the same thing. The 7(a) child care median is $387,000, and the central half of 7(a) child care approvals spans $112,500 to $950,000. Franchise share is 21.1%.

Outcomes and the banks behind them

Child care loans in 7(a) show a 12.2% floor for child care approvals of FY2017 to FY2024 and a 13.1% ceiling. Of 3,246 center loans that funded across FY2017 to FY2021, 2.7% at least were charged off, and 1.5% were lost inside five years. The Huntington National Bank holds 559 child care loans worth $283.5 million. TD Bank, National Association holds 324 worth $140.5 million and Wells Fargo Bank National Association 323 worth $373.5 million, while Live Oak Banking Company's 301 loans total $737.7 million, far larger loans on average than the banks listed above it. U.S. Bank, National Association follows at 224. Texas has 981 loans, Florida 711, California 610, Ohio 437 and New York 436. Volume dipped to 590 loans in FY2020 and climbed to 1,145 loans and $832.0 million in FY2025.

Testing a 7(a) center, new or acquired

Because 7(a) finances acquisitions as well as start-ups, a child care study should begin with which one it is. For an acquisition, it has to verify enrollment by classroom from the seller's records, the center's licensing and inspection history, staff tenure and the share of revenue paid by state subsidy, then value the goodwill the loan is buying. A start-up center instead needs demand shown from the families within a realistic drive, the licensed capacity of nearby centers and their waitlists, and a fill-up schedule a lender can believe. Coverage should be tested with payroll at the required staff ratios and with subsidy payments arriving late. The appraisal must split real estate, if any, from equipment and business value, since a leased center offers the lender little hard collateral. One limit applies: SBA codes in-home family child care alongside child care centers, so those providers sit in these 7(a) figures.