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

Child care centers rank 11 of 39 among Michigan asset classes, and the state is thirteenth for 7(a) volume in the class. SBA approved 201 loans worth $106.7 million between FY2017 and FY2026. The $250,000 median is only 0.65x the 7(a) child care median nationwide, and $90,000 to $550,000 covers the middle half. Franchise flags appear on 12.9% of loans. The distinguishing results are on the loss side: the funded FY2017 to FY2021 cohort of 75 loans shows 0.00% charged off to date and 0.00% by the fifth year, while cancellation is high.

Cancellation and what the zero means

Of Michigan child care approvals dated FY2017 to FY2024, at least 14.8% were cancelled, climbing to 17.3% if loans waiting to be disbursed are counted as cancelled. The 0.00% charge-off figure is a floor drawn from 75 loans, so it says that none had been charged off at the time of measurement, and not that none ever will be. Open loans may still change it. A borrower should expect the main risk to be a project that does not reach funding, which often means licensing, building or site delays.

Lenders and counties

The biggest holder is The Huntington National Bank with 59 loans and $20.9 million, followed by ChoiceOne Bank with 17 and $13.0 million, First Children's Finance with 12 loans of very small size ($1.1 million in all), and two lenders with 6 loans each: Bank of America, National Association ($4.0 million) and Northeast Bank ($806,600). These are SBA records of what each holds or held. WAYNE County has 50 loans and OAKLAND 49, followed by MACOMB 18, KALAMAZOO 11 and KENT 9, so metro Detroit supplies most of the lending. Volume dipped to 6 loans in FY2020 and rose to 28 in FY2024.

The study a Michigan child care center needs

The same industry code covers in-home child care, so some loans here may be family homes, and a center study should not assume its peers are alike. The first test is demand: children under school age within a realistic drive, the share of working parents, and the capacity of nearby licensed centers. The second is licensing: ratios of staff to children, space per child, and the time state approval takes. Staffing is the largest cost and the usual bottleneck, so wages and turnover need explicit assumptions. Tuition must cover the payment at less than full enrollment during a slow fill. If a building is purchased, the appraisal should value it as a general property, not only as a child care site. SBA states program terms.