SBA 7(a) Child Care Center Feasibility Study in Arkansas

Franchise-flagged child care and a bank that leads

Arkansas stands out in child care for how many loans are tied to a franchise system and for how concentrated the lending is. A franchise flag appears on 26.7% of loans, a far larger share than most care classes carry, and Southern Bancorp Bank holds 15 of the 45 approved loans with $19.1 million of the $31.4 million in gross dollars. Arvest Bank holds 8 loans with only $1.8 million, a much smaller average. These are SBA's current-holder entries and tell a borrower nothing of either bank's policies. In Arkansas the class stands 7 of 39 against its peers, though the state is 36 among states for the class.

Typical loans and where they went

The median is $346,600, 0.90x the national 7(a) median for child care, and typical loans lie between $76,500 and $765,000, a band that covers both a lease-hold start-up and a purchase of a building. Benton County leads with 11 loans, Pulaski has 8, Washington 6, Craighead and Hot Spring 4 each, and Faulkner 3. Greene, Boone, Carroll and Cross make up the rest of the listed counties with 2 or fewer. The northwest corner of the state and Little Rock, then, hold most of the activity. Any rural Arkansas project is working with very few precedents in the SBA record.

A volatile calendar

Year to year the record is jagged: FY2020 shows a single loan of $34,000, FY2021 rebounds to 10 loans with $6.9 million, and FY2022 posts 7 loans with $10.0 million, the largest dollar year. FY2024 returns only 2 loans and $470,000, and FY2025 recovers to 7 loans and $5.1 million. Cancellation of approvals through FY2024 stands at a floor of 6.1%, the ceiling being the same 6.1%. The early loans are too few for a loss rate, which is therefore withheld, not zero. Homes that offer family child care are filed under the same code as centers, so the class includes some home-based providers.

What an Arkansas child care study has to examine

Demand must be tied to children under school age within a short drive, to working parents and to existing licensed capacity, with waiting lists treated as evidence only when documented. Because a large share of these loans use a franchise system, the study should compare the brand's tuition and enrolment benchmarks with Arkansas wages and local prices, and show royalties and fees in the cost base. Staff ratios, licensing and safety requirements govern the build-out, which should be costed room by room. Cash flow has to carry the payment while the center fills, so the study should show monthly enrolment through the first year and a slower alternative. A lender will also ask how the building could be reused by another tenant.