SBA 7(a) Child Care Center Feasibility Study in New Jersey

New Jersey child care under 7(a): larger and more franchised

New Jersey places 9 among states for 7(a) child care loans, with child care placed 5 of 39 in the New Jersey ranking. Across FY2017 to FY2026 the record counts 365 loans worth $330.3 million. Franchising reaches 29.0% of loans, and the median loan of $425,000 is 1.10x the nationwide 7(a) benchmark. Most mid-sized loans fall from $150,000 to $1.2 million, which suggests New Jersey centers are often bigger undertakings, including purchases of buildings.

A lender table with large dollars

TD Bank, National Association holds 56 loans worth $30.7 million. Wells Fargo Bank National Association has 28 loans worth $39.5 million, Provident Bank 25 worth $28.0 million, Manufacturers and Traders Trust Company 24 worth just $4.1 million, and Live Oak Banking Company 21 worth $35.2 million. The spread between Manufacturers and Traders and Live Oak, with a similar loan count, shows very different typical tickets. SBA lists the holder or former holder and no more. Essex County has 49 loans, Middlesex 40, Hudson 28, Bergen 27, Burlington and Monmouth 25 each, Ocean 24, Mercer 23, Union 22 and Morris 20.

Floors

Cancellation after approval reaches at least 14.0% of approvals through FY2024, with 15.1% as the ceiling that counts undisbursed loans. Looking at 148 loans funded in FY2017 through FY2021, 2.7% are charged off to date and 2.0% inside five years, both minimums. Child care ranks fifth in New Jersey while the state is only ninth by volume among states, so a sponsor can usually find comparable local loans to cite as precedent for the amount requested.

Proof a New Jersey center file needs

Begin with the demand for infant, toddler and preschool places in the immediate area, the licensed centers already operating, and the families' ability to pay the tuition the plan requires. Real estate costs are high, so decide whether the loan funds a lease fit-out, an acquisition or construction, and compare the budget with a ticket near $425,000. Staffing to regulatory ratios drives margin. A coverage test should assume a slow fill and a period of lower tuition. An owned property will be valued on what another operator could earn.

The industry code blends in-home providers with centers, so some of these loans may finance family operations.