As a loan broker, I know the lowest cost lenders.
Childcare Franchisees:
For lending to franchisees, my best lender has the following terms: (August, 2021)
- 3.2% to 4.25% fixed for 25 years – financing both business and real estate acquisitions
- 3.2% to 4.0% fixed for 20 years – refinancing both business and real estate
- 3.2% to 4.25% fixed for 10 years – financing business only acquisitions
- 3.2% to 4.25% fixed for 7 years – refinancing business only
My best lender requires the borrower to have +$300k in liquidity and very good financials. Loan size of $400k to $5 million.
I also know the lenders who offer very low cost interest rates (but, not as low as the above).
- 3.5% to 4.25% fixed for 25 years – financing both business and real estate acquisitions
- 3.5% to 4.25% fixed for 20 years – refinancing both business and real estate
- 4.75% to 5.25% fixed for 10 years – financing business only acquisitions
I also know the lenders who like to lend to childcare centers and concentrate on those borrowers who may traditionally have a more difficult time getting a loan. Their interest rates are higher, but, because they like the childcare industry, they will make loans to centers when many lenders will not.
If a SBA or conventional lender is only offering you interest rates higher than the above, contact me to get lower rates!
Startup franchised childcare centers are also financed when the franchisee will own both the real estate and business. Loans can have interest ONLY payments for the first one year of operation.
I know financing franchisees!
Independent Childcare Centers:
I love to finance independent childcare centers! (those not franchisees). The interest rates for most centers doing well is similar to the above “very low cost interest rates rates”.
Childcare centers will multiple locations can get interest rate similar to “my best lender for franchises”.
For updated rates, please contact me.
Ten (10%) percent is generally the minimum down payment on an acquisition. (Although, I have lenders that will do a 5% down payment from the buyer, as long as the seller provides 5% seller financing.)
Zero (0%) percent down payment required for: 1) Tenant buying the real estate that they are leasing, and 2) Partner buying out other shareholders.
Conventional Commercial Loans:
- Conventional loans for childcare centers are generally up to 75% to 85%) of the real estate appraised value. They are amortized over 20 to 25 years. The loans generally have a 5, 7, 10, or 20 year maturity. Interest rates can be fixed for 5, 7, or 10 years; or some lenders fix the interest rate for the first five years and then re-fix the interest rate for the following five years at the going interest rate in five years.
- A low fixed rate conventional loan can be the best to refinance away from a SBA 7(a) loan that has a variable interest rate.
- A conventional loan is often the only way to finance a childcare center if the borrower has outstanding tax liens, recent bankruptcies/foreclosures, or is not current on government-related loans.
- A few conventional lenders will also lend to up to 75% of the business value.
SBA 504 Loans:
- About 44.4% of the total loan is a FIXED rate for the entire term of the loan (up to 25 years) – current rate on this portion is about 2.8% .
- About 55.6% of the total loan can be either:
- Fixed rate for the first 5 years – depending on the project & borrower’s credit score, the interest rate on this portion of the SBA loan is generally at the interest rate listed above for franchisees or independent centers.
- Variable rate – interest rates are generally the Prime Rate +1.0% to +1.9%.
- Requirements: Minimum credit FICA score is 660… can refinance up to 85% of the real estate appraised value. Only a 10% down payment is required on acquisitions of operating childcare centers, or starting up a new location. No equity injection is required for refinancing.
- A SBA 504 loan is often the best to refinance away from conventional loan if you expect interest rates to increase, or you want the security of having a loan that will never be called or have a balloon payment. (By not having to refinance every 5 to 10 years, it can also eliminate loan closing costs in future years.) It can, only in limited circumstances (expanding a current facility or adding a new facility), be used to refinance away from a SBA 7(a) loan. An SBA 504 loan is also the best to finance an acquisition of a childcare center if there is less than $500,000 of goodwill being acquired.
SBA 7(a) Loan:
- A SBA 7(a) loan can be either fixed or variable with up to a 25 year amortization.
- The maximum rate on a SBA 7(a) loan is the prime rate + 2.75%.
- A SBA 7(a) fixed interest rates can generally be fixed for a limited time (3, 5, 7, or 10 years). Interest rates for fixed interest rate SBA 7(a) loans are higher than variable interest rate SBA 7(a) loans.
- Requirements: No equity injection required for refinancing. Refinancing loans can be up to 85% of the appraised value of the real estate and business. For well performing franchised childcare centers, only a 10% down payment is sometimes required to start a new location. To buy an operating childcare center, normally a minimum of 10% down payment is required. A SBA 7(a) loan can, only in limited circumstances, be used to refinance an existing SBA 7(a) loan with a higher interest rate because of SBA regulations.
- A SBA 7(a) loan is best for financing the acquisition of a childcare center when substantial goodwill is being acquired, and for smaller acquisitions where SBA 504 lenders are not interested. A SBA 7(a) loan is used to refinance away from a conventional commercial loan if you want the security of having a loan that will never be called, or have a balloon payment, instead of refinancing it every 5 to 10 years.
United States Department of Agriculture Business & Industry Loans (USDA B&I):
- The USDA B&I loan can have a fixed interest rate with up to a 30 year term.
- The interest rate can be as low as Prime +1.25% to +1.75% for childcare center loan refinancing.
- An USDA B&I loan interest rate is generally fixed for 5 years and reset each five years for the life of the loan.
- Requirements: Refinancing loans can be up to 80% of the appraised value of the real estate. No equity injection required for refinancing. An USDA B&I loan can only be used in areas with less than 50k population. (This map shows eligible areas) Many areas on the outskirts of major cities are still eligible.
- An USDA B&I loan can be best for re-financing away from a SBA 7(a) loan. An USDA B&I loan is used at times to refinance away from a conventional commercial loan if you want the security of having a loan that will never be called, or have a balloon payment, instead of refinancing it every 5 to 10 years. (It also eliminates future closing costs associated with refinancing a conventional loan every 5 to 10 years.) An USDA B&I loan can be used by both owner-occupied businesses and landlords. The USDA B&I loan program is the only government guaranteed loan program that landlords qualify for! An USDA B&I loan is often the best loan to lower the borrower’s risk of loan default in difficult economic times because: 1) It has the lowest monthly payments because the loan is amortized over 30 years. 2) If the borrower makes additional principal payments, future monthly loan payments are reduced even more!
Request a SBA Loan Pre-Qualification to Find Out 1) How Much, and 2) The Lowest Interest Rate You Qualify For! Submit your information online if you are interested in financing an acquisition of a Childcare Center, or starting a childcare center.
Complete an online application and submit it now to get started TODAY!
How Much You Can Save By Refinancing Your Current Loan? Submit your information online if you are interested in refinancing an existing Childcare Center loan.
Complete an online application and submit it now to get started TODAY!
JayWhitney@ChildcareBrokers.com 770-410-7582