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

Smaller loans than the class nationally

Kentucky child care centers received 59 SBA 7(a) approvals from FY2017 to FY2026 totaling $35.3 million. The median loan, $219,900, is only 0.57x of the 7(a) national median for child care operators, so Kentucky borrowers in this class take smaller loans than the national 7(a) median for child care. Half of the approvals sit between $50,000 and $695,850, a wide band. Kentucky stands 31 among states by count, and child care sits 8 of 39 on the Kentucky asset list; a franchise brand appears on only 5.1% of the loans.

The code and its edge

SBA files these loans under an industry code that also holds in-home child care, so a home-based operator can sit in the same data as a center. Some of the smaller approvals may belong to a home operator rather than a center. A reader comparing the $50,000 lower quartile to a facility purchase should keep that in mind.

Lenders and counties

The leading holder, The Huntington National Bank, has 10 loans totaling $3.4 million; First Financial Bank, National Association shows 7 at $4.5 million; Republic Bank & Trust Company shows 6 at $1.7 million; Northeast Bank shows 5 at $775,000. These are current holders as SBA reports them. Jefferson County dominates with 22 loans; Allen, Campbell and Kenton follow with 4 each. Annual counts ran from 2 in FY2020 to 11 in FY2026, and the biggest dollar year was FY2018 at $7.1 million.

Floors, then the study

Kentucky cancellations stand at 15.0% for approvals dated FY2017 to FY2024, and the undisbursed-loans ceiling does not move it, staying at 15.0%. Loan Analytics withholds the loss rate, since too few Kentucky loans funded early enough to measure; a withheld rate does not mean nil. A Kentucky child care study should begin with licensed capacity in the catchment, the children of working households within a reasonable drive, and the state's staffing ratios that limit enrollment per teacher. Tuition levels and subsidy participation have to be argued from the local market. The study must show lease-up of enrollment, payroll, and debt service covered at partial enrollment. If the project is a purchase, the appraisal will rest on income, not only the building.