Conventional and SBA Financing for Daycare Businesses
According to IBISWorld’s 2017 report, the U.S. daycare industry is valued at $48.9 billion and grew 1.3% annually over the last five years. The number of U.S. single-parent households is on the rise; so is the percent of families that need both parents to work in order to make ends meet.
As the daycare industry evolves, more business owners than ever are choosing to expand their operators—whether through commercial real estate, technology upgrades or other business investments. If you’re one of the many daycare businesses considering expansion, it’s crucial to understand the complex world of financing.
The experts at Cornerstone Capital Lending have a track record for helping daycare businesses navigate the commercial finance process with clarity. Here’s what you need to know about conventional and Small Business Administration (SBA) financing for daycare businesses.
Why Secure Financing for your Daycare Business
Daycare businesses looking to grow often choose to do so by purchasing their existing building or other real estate, expanding a current location, or buying new technology to enhance their operations. But it can be difficult—or impractical—for owners to shoulder the expenses involved in these investments as they manage the day-to-day of their daycare business. If this sounds like your situation, commercial loans are worth exploring.
As a daycare business owner, you wouldn’t cut corners when it comes to Department of Children and Family Services requirements and other licensing. You shouldn’t cut corner on your financing, either.
When considering financing for daycare businesses, it’s important to ask yourself key questions:
- Have you explored all the other growth options available to your business?
- Do you have a plan for how much funding you need and how exactly it will be used?
- How will your investment impact your business’ bottom line? For instance, if you’re considering a loan for new technology, how would that technology increase productivity or other key revenue drivers?
- Have you contacted a certified lending company to help you determine which loan type is best for your daycare business’ needs? (If not, reach out to us now!)
Because there are many financing loan options available today for daycare businesses, it’s important to choose one that will offer the most long-term benefit for your company. Your goal for financing should be to expand your profits and growth while avoiding the pitfalls of an inappropriate lender or loan choice.
An experienced financial partner can help you select the ideal loan type for your daycare business, streamline the application process and negotiate the best financing for your situation. Because your business objectives may evolve over time, a certified advisor can also ensure that you consider all your lending options—not just for their payment terms, but also for their impact on your business’ financial future.
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Types of Financing for Daycare Businesses
Not all financing options are created equal. That’s why we provide our clients with one of the country’s widest varieties of financing options for daycare businesses. These options can be adjusted to ensure that your loan will help you expand without diminishing your hard-earned profits. We offer options for businesses at all stages of growth.
In this article, we will discuss two common types of financing for daycare businesses: SBA and conventional loans.
SBA 7(a) loans for daycare businesses
SBA 7(a) loans are the most common type of SBA financing. The loan allows business owners to secure financing for up to $5 million to cover the following activities:
- Purchasing new land, including construction
- Purchasing or expanding an existing business
- Refinancing existing debt
- Repairing existing capital
- Purchasing machinery, furniture, supplies, fixtures or materials (for daycare businesses, this can go a long way toward helping you keep your facility in top shape)
When compared with other financing options, the SBA7(a) loan often gives qualified business owners longer terms, more flexibility and lower down payments.
SBA 504 loans for daycare businesses
Also known as Certified Development Company (CDC) loans, SBA 504 loans are designed specifically for businesses looking to purchase real estate or equipment. SBA 504 funding can be used for:
- Purchasing land or existing buildings
- Purchasing long-term machinery and equipment
- Building new facilities or modernizing, renovating or converting your business’ existing facilities
- Purchasing improvements like street improvements, parking lots and utilities
Unlike the SBA 7(a), the SBA 504 cannot be used for working capital or inventory, or to consolidate, refinance or repay debt.
Conventional loans for daycare businesses
If you’re looking specifically to purchase or refinance commercial real estate for your daycare business, you might want to consider owner-occupied conventional loans . This loan applies to many multi-use owner-occupied property types, including “special use,” which applies to daycare facilities, assisted living facilities and funeral homes. Other eligible properties include:
- Office properties: Professional, condominium, medical, dental, and veterinarian
- Industrial Properties: Heavy and light manufacturing, warehouse and R&D flex
- Retail Properties: General
SBA Financing for Daycare Businesses
Since it was founded in 1953, the SBA has delivered millions of loan and other forms of assistance to small businesses nationwide. In 2014, the SBA approved more than 52,000 SBA 7(a) loans totaling $19.19 billion— an increase of 7.4% from the dollar value of the loans it granted in 2013.
SBA loans are not provided directly by the SBA. Instead, the SBA provides a guarantee to banks and lenders for the funding it lends to small businesses. When your daycare business applies for an SBA loan, you will actually be applying through a bank or an authorized SBA lender like Cornerstone Capital Lending.
The SBA also offers specialized loan assistance for veterans. If your daycare business is in a rural or another qualifying area, you can apply for a loan through the United States Department of Agriculture (USDA) .
Why choose SBA financing for your daycare business? This loan program offers many benefits to qualifying business owners, including lower down payments and longer repayment terms than conventional bank loans. SBA loans could also be a good option if you’re looking to preserve capital as you grow your daycare operations.
The SBA guarantees part of the loan in case a business defaults. Traditional loans can charge high rates for guarantees.SBA loan interest rates and fees are often less than or equal to those of unguaranteed loans.
Choosing an SBA Lender
As with any other professional service, you have numerous choices when it comes to selecting a lender for your SBA loan. When choosing a lender, it’s crucial to evaluate them based on the following criteria:
- What experience does this lender have in your industry? Has the lender helped other daycare businesses secure financing?
- What other loan programs does the lender provide?
- Is your lender certified by the SBA in each of these loan types? SBA 7(a) Loan, SBA 504 Loan and SBA Microloans.
When choosing a certified SBA Lender, it’s also important to understand their approach and the scope of their loan programs. Many small businesses find it valuable to choose a partner that offers:
- Flexible payment terms and down payments
- A variety of loan programs (SBA 7(a) and SBA 504 loans, USDA loans, conventional loans, construction loans and more)
- A dedicated certified expert to guide you through the complex commercial financing process
- A quick approval process
The SBA certified team at Cornerstone Capital Lending has more than 40 years of combined experience helping businesses secure SBA and a variety of other loan types. We understand the specialized requirements of daycare businesses and have a track record of helping businesses in all growth stages achieve the financing they need to succeed.
Our wide variety of loans can be tailored specifically to your vision for growth. But don’t simply take our word for it; review our recently funded businesses for a glimpse into our winning track record.
The Loan Process for Daycare Businesses
When you decide to explore conventional or SBA financing for your daycare business, reach out to a certified financial expert. Cornerstone Capital Lending offers our clients a streamlined process that maximizes your time. We know how busy you are running your daycare business; that’s why we inform you quickly whether you qualify for a loan.
Applying for SBA financing for daycare businesses
- Complete our simple online quote form . If you don’t know all the information required by the online form, contact us here instead.
- Talk with our expert consultants about your financing requirements and options.
- Notify us when you’re ready to complete a loan application. You’re under no obligation to proceed with an application after your initial discussion with us.
- Complete your SBA loan or other loan application. We’ll explain your loan’s required documentation and help you understand any other fine details in your application.
- Receive and review your quote. In most cases, we deliver your quote within 48 hours. All your information is strictly confidential and will only be used in the application process.
- If you’re ready to move forward with your quote, complete the Letter of Intent or Conditional Offer.
- If you’ve been successful thus far in the process, underwriting will now begin. Our team will ensure you know how to obtain all the documentation required by your application.
- Secure your loan, usually within 45 days of starting the process with Cornerstone Capital Lending.
SBA loans require specific documentation. For the SBA 7(a), you will need to submit a completed application, personal financial statements, business debt schedule, income statements and numerous other documents. (For more, review this SBA 7(a) submissions checklist ). Choose a certified commercial financing expert who will help you through this process. Submitting the correct paperwork helps ensure your loan application is completed as quickly as possible.
Start The Daycare Financing Process
Whether you’re looking to purchase commercial real estate or update your existing daycare facilities, Cornerstone Capital Lending has a loan program to meet your business’ needs. With a broad portfolio and decades of expertise, our certified advisors help businesses of all sizes meet their capital requirements. Reach out to us today to explore conventional and SBA financing for daycare businesses like yours.
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