The SBA 7(a) loan program is particularly suitable for childcare businesses because it allows the financing of goodwill and other intangibles. As long as commercial real estate makes up the largest percentage of the total, funding of up to $5 million can support franchising, renovations, and childcare facility operations.

There are some basic eligibility requirements for the SBA 7(a) loan:

• Your business must operate for profit. Nonprofits and not-for-profit businesses are not eligible.
• You must also have some equity in the business — this could mean you already have a profitable business, or you could use your own personal equity as collateral.
• If you have any alternative financial resources, you must have used them first. For example, if you have a personal savings account or are able to get a personal loan, then you must first pursue those options before applying for an SBA 7(a) loan.
• The business owner cannot be on parole.
• You must be doing business in the U.S. or its territories.

The SBA 7(a) loan program is particularly suitable for childcare businesses because it allows the financing of goodwill and other intangibles. As long as commercial real estate makes up the largest percentage of the total, funding of up to $5 million can support franchising, renovations, and childcare facility operations. The SBA 7(a) program is a fantastic way for childcares, daycares and preschools to get assistance with commercial real estate financing.

In particular, preschools and daycare center owners can use SBA 7(a) loans to:

• Build a new preschool or daycare center. SBA 7(a) loans can cover nearly all expenses associated with construction, including security systems, safety equipment, and even furniture.
• Buy out a partner: If you’ve started a daycare center or preschool with a business partner, and they want to retire or move on to a different industry, an SBA 7(a) loan could be a fast and efficient way to buy their stake in the business.
• Refinancing business debt: If you have SBA-eligible business debt (i.e., a business loan that was used for legitimate business purposes), that is currently being offered to you on unreasonable terms, you may be able to refinance it with an SBA 7(a) loan.
• Purchasing an existing preschool or daycare: If you want to purchase an existing preschool or daycare business, you can do so with an SBA 7(a) loan. You can also use it to purchase an existing structure and upgrade/modify it to better fit your business.

To apply for an SBA 7(a) loan for a preschool, you will need to provide the following documents:

• SBA Form 1919 (borrower information form)
• SBA Form 912 (statement of personal history)
• SBA Form 413 (personal financial statement)
• Business and affiliate financial statements, including a balance sheet, profit and loss, and income projection

The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.

The maximum loan amount available for an SBA 7(a) loan for a preschool is $5 million. This loan is intended only for the purchase or construction of owner-occupied commercial real estate.

For smaller preschools or daycare centers, an SBA microloan may be a better option. This loan offers amounts of up to $50,000 and has significantly relaxed credit score requirements.

The repayment terms for an SBA 7(a) loan for a preschool depend on the amount of the loan and the repayment plan you have in mind. Generally, the SBA 7(a) loan program allows for repayment terms of up to 25 years for real estate and up to 10 years for equipment. The SBA will only guarantee a portion of the loan, and you’re still responsible for paying the balance.

Learn more: Understanding How the SBA Guarantees Loans