Child Daycare & Preschool Financing
In 2015, the labor force participation rate, which includes people currently working and actively searching for work, with children under the age of eighteen was 69.9 percent – and this number is only continuing to grow. More and more mothers today are entering the workforce; and with an average of 92 percent of all men with children under the age of eighteen participating in the labor workforce, there is a constantly growing need for child daycare services. There are still plenty of stay at home parents, however more women today want a career, leading to either a stay at home dad to watch the kids, or outsourcing that work to an accredited facility.
By 2012, there were over 53,000 commercial child daycare facilities that averaged around $20 billion in revenues; there were also 21,000 child daycare facilities run by nonprofit organizations that had a combined annual revenue of $13 billion. These numbers are astonishing considering many people were still unemployed at this time from the effects of the Great Recession. Demand for childcare services is constantly growing, especially with Millennial’s reaching child bearing ages. With increased employment throughout 2016 which has contributed to extra disposable income, the dependence on child daycare services has skyrocketed. In the child daycare industry, there are major companies today, however small scale child daycare businesses are still incredibly profitable, with the top fifty companies only generating less than 20 percent of the child daycare industry revenue. This is great news for many smaller child daycare businesses, particularly because there is so much room for growth – by 2017, the child daycare industry is expected to generate over $53 billion in revenue.
Childcare Trends and Loan Uses
The child daycare industry is constantly evolving, with many childcare businesses being skeptical of economic conditions. Many new child daycare industry trends are heavily influencing many child daycare businesses today, however most of the time, adjusting to changing industry trends and regulations lead to expensive costs. Being ahead of the game and staying on top of the child daycare industry trends are vital, but also considering the variety of financing options to help ensure that the child daycare is staying up to date on the latest regulations and technologies can be beneficial.
- Employer Sponsored Daycares: Most employers today are realizing that they will lose vital employees if their family needs are not met. With many women interested in entering the workforce, if they are not already apart of it, employers everywhere are starting to include child daycare services as part of the employee benefit package. This typically consists of the employer working with a local child daycare center by paying for the service on behalf of the employee.
- Regulations: There are a variety of regulations that have been put in place to ensure the safety, health, education, and overall wellbeing of the children at child daycare facilities. The government has recently taken even more of an interest in this particular industry, especially as many parents are seeing the growing educational and social benefits associated with these child daycare facilities. While many of the regulations actively being put in place are expected to increase profitability and safety in the long run, this is often a major struggle for established child daycare businesses. Having to constantly adjust rules, safety guidelines and structures, and ways of running a child daycare service are often expensive ventures that smaller child daycare businesses struggle to afford. Reviewing the variety of loan options available to help stay up to day with these regulations can help. Here are some major regulations to pay attention to:
- The Child Care and Development Block Grant: This is a federal law that helps establish guidelines for child care programs in each state. It was renewed by Congress in 2014 with four major changes: protect the health and safety of the children, help parents make informed choices through better access to information, provide equal access to high quality childcare for low income families, and to enhance the quality of early childcare. What these look like for each state will vary, but has led to many expensive ventures for child daycare businesses.
- FY2017 Funding: Unfortunately, Congress has extended the timeline to establish the necessary amount of funding for CCDBG and Head Start to April 28, 2017. What this means is that these vital federal programs will remain at low FY16 levels, however major organizations are working to inform all individuals of the vital necessity of more funding for CCDBG and Head Start.
- Educational Resource and Safety: Most child daycare facilities are focusing on implementing more educational activities to help children develop their intellectual, physical, social, and emotional skills. This is vital component for many parents today, especially with the typical high fees associated with child daycare facilities. Most parents want to know that their child is in a safe environment, as well as an environment that promotes growth. Many successful child day care businesses are implementing more educational resources, while continuously updating regulatory compliance to increase child safety.
- Food and Health: With the ever growing obesity epidemic in the United States today, many parents are considering food and health standards and practices as a necessity provided by the child daycare company. There is also a growing dependence and regulatory standard for vaccines and immunizations for all children. There are a variety of resources to help make sure that every child daycare facility is working hard to comply with parental and federal standards.
- Technology: With every industry, technology is taking over. While there are a variety of technological systems and software’s that are essential to running and managing a child daycare service, the most important technological advancement that is greatly helping child daycare facilities is a new technology called “I See You”. This software is payed for by the daycare center, but parents must pay a user fee. Through “I See You”, a camera is placed in the child daycare facility and takes still screens every thirty seconds. These photos can then be viewed online by the parents to ensure child safety and practices.
- Marketing: Marketing, advertising, and social media are necessary for every business in any industry, however child daycare services have the unique ability to still utilize traditional forms of marketing with online advertising techniques. Many child daycare businesses work with local schools, apartment complexes, local businesses, local churches, and so forth to hand out fliers and advertising campaigns to parents. Every child daycare business must be taking advantage of the variety of marketing tools available to this unique industry, especially since marketing is the number one way to draw in new customers.
Comparing Childcare Business Loans
|Bank||6-10%||3-7 years||14-30 days|
|SBA||6-10%||3-7 years||10-30 days|
|Alternative||6-25%||1-5 years||5-7 days|
|Cash Advance||1.16-1.55||3-24 months||1-3 days|
Childcare Bank Loans
While not easy to obtain, if your preschool or childcare center has established profitability, and if you have great credit, use of a bank loan to purchase, refinance, expand or model your childcare center or preschool is a fantastic option.
- Rates: 5-10%
- Terms: 1-25 years