What Can Daycare Business Loans Pay For at a Smyrna, TN Child Care Center?

A commercial loan for a child care center can mean one of two things: a loan on the property, or funding for the business that runs in it. Deltaspring Lending Group handles only the second, through equipment financing, working capital, a term loan or a line of credit.

The difference shapes the request. A property loan rests on the building and its appraisal. A business loan rests on the center's own records: enrollment, tuition coming in, payroll going out, and the equipment it owns.

County Business Patterns counted 49 child day care services establishments with employees in Rutherford County, TN in 2023 (NAICS 624410). Together they reported 1,070 paid employees, and only 4 of the 49 had fewer than five.

ZIP Code Business Patterns is a separate file; it puts 10 child day care services employers at a ZIP 37167 address.

Illustration only, invented figures: a director buys an existing center from a retiring owner for $240,000: $58,000 in kitchen, play and office equipment, $15,000 in supplies on hand and $167,000 for the enrollment base and the center's name.

In this invented case, with $30,000 down, or 12.5%, the buyer finances $210,000. Over 84 months at an annual rate of 9.7%, the purchase costs $3,453.78 a month; across the term that is $290,117.52, including $80,117.52 of interest.

Most of this invented price is goodwill rather than equipment, and a funding partner may weigh that when it sets a down payment or a term. Whether the license, the lease and any program agreements can pass to a new owner is a question for the seller, the landlord and the licensing agency; a funding partner may ask about each one.

The purchase agreement sets out what is being bought, so it is worth reading before the call. In this invented example, the $58,000 of equipment can be listed piece by piece and may help secure part of the loan; the $167,000 for the enrollment base has nothing physical behind it, so the seller's records, such as current enrollment by room and tuition collected over the past year, carry that part of the request.

Illustration only, invented figures: a center that is already open carries three balances: a business card at $6,800 with a $204 monthly payment, an equipment loan with $9,400 left at $520 a month, and an advance with $5,300 still to be collected at $96 a business day, about $2,016 over 21 business days.

Those three invented balances take about $2,740 a month. A term loan of $21,500 over 36 months at 12.2% would replace them with one $716.16 payment, $25,781.76 across the term and $4,281.76 of it interest.

A lower monthly figure is not the whole comparison. Stretching balances over 36 months can raise the total paid, and an advance agreement may or may not reduce the amount owed when it is paid off early, so read each agreement's payoff terms first.

It also helps to ask for written payoff figures from each holder before the request goes in. The card balance, the equipment loan and the advance each quote their own amount for a given date, and the term loan request should match the sum of those figures, not the balances printed on last month's statements.

A funding partner may ask for records like these, so it helps to gather them before the call:

• Enrollment by room, set beside each room's licensed capacity
• Tuition billed and tuition still unpaid, by month
• Any state subsidy payments, with the dates they arrived
• Payroll registers showing staff counts per pay period
• The center's business tax return for the latest full year

Play equipment, kitchen equipment and insurance premiums are worked through on the daycare centers page; equipment terms are on the equipment financing page, and more articles are on the blog.