In the United States, the daycare industry is expected to be one of the fastest-growing industries through 2020. If you’re ready to take on a business mortgage, the SBA 7(a) loan might be your path to starting a preschool.
The SBA 7(a) loan is offered through traditional lenders like credit unions and banks. Commercial real estate loans under the SBA 7(a)—some with a 25-year term—can be as large as $5 million. Eligibility requirements are straightforward, and lenders typically require a simple 10% down.
You can use the funds from the SBA 7(a) loan for nearly any legitimate business need: equipment costs, land and real estate, and even working capital. For your daycare facility, you can use the SBA 7(a) for:
New construction of a daycare. Any of the costs associated with new construction can be covered by the SBA 7(a): educational materials, furniture, alarms and security, etc.
Refinancing a daycare. The funds from the SBA 7(a) can be used to refinance an existing loan. There are specific conditions for the loan to be used this way; for more information, check out our page on Refinancing Debt. Learn More
Buying a facility for a daycare. Purchasing an existing site is a legitimate use of the SBA 7(a) loan. A daycare facility is not purpose-built, but must have adequate bathrooms and space for equipment, employees, and attendees.
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SBA7a.Loans can also help connect you with other government-backed loan programs, like the SBA 504 loan program. This loan is larger than the SBA 7(a), and can require a more favorable amount down for the borrower. The SBA 504 is typically used with a traditional loan to cover construction costs or the purchase of commercial real estate.