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

Big loans, and a coding caveat

California child care centers borrow more under SBA 7(a) than centers elsewhere, and size is what sets the cell apart from California across all classes and from child care elsewhere. At $471,750 the median is 1.22x the national figure, with the central half of loans between $150,000 and $993,375. From FY2017 to FY2026 the files record 610 loans totalling $511.1 million gross. California is third in the country for the program and class, and child care is 13 of 39 in California's class order. Franchise brands hold 10.2% of the loans. A coding note: one industry code covers both centers and in-home care, so some of the smaller loans may fund home-based operators and cannot be split out.

Holders and places

U.S. Bank, National Association holds 61 loans worth $43.2 million, Wells Fargo Bank National Association 43 loans, $30.3 million, Live Oak Banking Company 30 worth $64.0 million, Readycap Lending, LLC 22 worth $13.2 million and Northeast Bank 21 worth $3.3 million. Live Oak's dollar total is large for its count. The holder field is SBA's record and says nothing about the standards any bank applies. Los Angeles County has 134 loans, San Diego 69, Santa Clara 53, Orange 47, Alameda 45, Contra Costa 32, San Mateo 27, Sacramento 25, Riverside 23 and San Bernardino 22. Approvals grew from 35 in FY2017 to a peak of 113 in FY2025.

Outcomes

The cancellation floor is 12.8% for the FY2017 to FY2024 group; the ceiling is 13.0%. Of 216 loans funded in FY2017 to FY2021, 2.8% show as charged off so far and 1.4% by the fifth year. Open loans can still fail. Neither rate is what makes the California cell distinctive.

What a California child care study has to test

Licensing comes first. A center cannot open without state licensure, and the capacity the license allows, set by square footage and staffing ratios, determines revenue, so the study should show how many children the building can legally hold in each age group. Demand is measured by the age cohorts within the trade area, working-parent households and the number of licensed seats already open. The study should compare a build-out or purchase budget with a median near $471,750, listing land, construction, playground and safety requirements, and furnishings separately. Payroll is the largest operating cost, so coverage should be tested on a slow enrollment ramp. An appraiser values a special-purpose building largely on income, which the study must support.