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

Texas child care under the 7(a) program

Texas ranks first among states by count of 7(a) child care center loans. From FY2017 to FY2026 SBA files list 981 of them, worth $1.31 billion, and child care takes sixth place of 39 when the state's classes are ranked. Child care's median loan is $631,000, which stands at 1.63x the program's median for centres nationwide and is one of the distinctive features of this cell. Half of the loans fall between $266,000 and $1.8 million. Franchising accounts for 37.8%, a large minority, so a Texas centre is often a branded unit with a franchisor supplying curriculum, marketing and operating standards.

Lenders and geography

Wells Fargo Bank National Association holds 68 loans worth $75.2 million and The Huntington National Bank holds 66 worth $65.5 million. Readycap Lending, LLC shows 46 worth $63.5 million, Live Oak Banking Company ($156.5 million over 45 loans) and PNC Bank, National Association ($117.7 million over 45 loans). Each figure counts loans on that lender's books, and none of it speaks to practices. Harris County leads with 214 loans, Tarrant has 93, Collin 87, Dallas 69, Denton 66 and Fort Bend 65. The suburban rings around Houston and Dallas account for most of the record, as one would expect where young families settle. Annual approvals dipped to 57 in FY2020 and reached 131 in FY2025.

Outcome floors

Cancellation among FY2017 to FY2024 approvals starts at 12.1% and rises to 12.7% if undisbursed loans count as cancelled. The cohort of 411 loans disbursed between FY2017 and FY2021 shows 3.4% charged off so far, with 2.4% gone inside five years. Both are floors, because open loans can still move them upward. They sit well above the charge-off floor for Texas gas stations and below the figures for auto repair, which places child care in the middle of the risk range.

A coding caution

SBA's data blends family child care homes with centres, since in-home care shares the industry code. Some of the 981 loans may therefore be to home-based providers, who borrow far less than a purpose-built centre. A lender should not assume every loan here financed a building.

What a Texas child care study has to test

Demand for child care is local and sharply bounded. The study should count children of the right ages around the site, the spare capacity of existing centres and their waitlists, and the incomes that determine tuition. Staffing is the central constraint, because licensing sets ratios of children to staff, so wages and turnover need explicit assumptions and enrolment should climb slowly in the model. A new building or conversion should be tested against a median near $631,000, with the licensing and safety work costed. If the unit is franchised, royalties belong in the cash flow. Repayment must hold at partial enrolment, and an appraiser will treat a centre as a going concern.