Should You Use An Advisor When Financing?

If you are tired of talking to bankers that in the end are not going to competitively lend to the childcare industry, or just don’t seem to understand your request, try talking to us, the childcare lending experts. We understand your childcare business.

You could do all the work associated with refinancing your childcare center by yourself.

  • Financing and refinancing a childcare center is not an easy task if you want to come out with low interest rates and good terms. All too often, an owner of a childcare center has the misconception that they can just provide a potential lender the financial and tax information and some other basic information on the center.
  • If, after months of searching for a loan yourself, a potential lender tells you “This is the lowest interest rate and best terms we can provide”, you may accept the bank’s statement as true, even though that bank has, and will, provide better terms, or there are other lenders who will provide better interest rates and terms.

Background Information On Finding Lenders To Childcare Centers

The most common confusion about SBA loans is that the SBA lends money directly to small businesses – which is not the case. Instead, the SBA provides guarantees to lenders so that if a borrower defaults on the loan, the SBA will pay the lender. About four thousand lenders make SBA loans.

In the last six years, on a national basis, there have been 5,477 SBA loans made to childcare centers. Studies indicate that many times this number of business loans for childcare centers were likely applied for through local banks and rejected. Nationwide, out of all the lenders that do SBA loans, only 424 lenders have done more than one (1) SBA loan to childcare centers over the last six years.

As of the beginning of 2017, there were 5,116 commercial banks in the nation, which is a 28% reduction since the recession started in 2008. Since 2010, only eight (8) new banks have started.

The number of non-bank lenders have exploded since 2008. To stay competitive, both banks and non-bank lenders are using brokers for commercial lending as a way to convert their fixed overhead costs of salaries to a variable costs for brokers. Brokers are involved in 60% to 95% of all commercial loan closings with many aggressive commercial lenders.

What the above means, is that a potential borrower who only looks at the banks located in her/his area will likely be missing out on most aggressive lenders, and will likely be contacting lenders that don’t have competitive rates for childcare centers as shown by the fact that they have done either none or only one loan to the childcare industry in the last six years.

Small business owners generally say that it is hard work finding a loan. Applying for a loan is needlessly time-consuming, from navigating the labyrinth of lenders to the paperwork. The Federal Reserve even says that small business borrowers spend over four full days of man hours searching for a loan because the process is so complex. To make matters worse, most lenders market themselves in exactly the same way. Just Google “small business loan,” and you’ll see advertisements from lenders that all say about the same thing.

You could use your current bookkeeper or CPA to handle the refinancing. But, are these professionals experts in childcare lending, or are they experienced in some other area… like taxes! They may know some local bankers, but, are the bankers they know the best lenders for you? Do they (like Childcare Brokers) have a database of every single SBA loan ever issued since 1990 to find the lenders that will provide the lowest rates?

JayWhitney@ChildcareBrokers.com 770-410-7582

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