SBA loans for daycares and child care centers

What can a daycare use an SBA loan for?

Child care businesses use SBA financing for most of the big steps in owning a center:

• Buying an existing daycare, including its equipment, enrolled families and trained staff. See SBA loans to buy a business.
• Opening a new center or franchise unit, from build-out to the months before enrollment fills. See SBA start-up loans.
• Buying or building a facility. See SBA commercial real estate loans.
• Renovations to meet licensing rules, such as classrooms, child-sized restrooms, kitchens, fencing and outdoor play areas.
• Equipment and vehicles, from cribs and classroom furniture to playground equipment and passenger vans. See SBA equipment loans.
• Working capital for payroll, rent and supplies while enrollment grows. See SBA working capital loans.

The SBA 7(a) loan goes up to $5 million and can combine several of these uses in one loan. Smaller requests, such as a van or new playground equipment, may fit an SBA Express loan of up to $500,000 or a 7(a) Small Loan of up to $350,000.

The 7(a) and 504 programs are for for-profit businesses. Certain nonprofit child care centers can borrow through the SBA Microloan program instead.

Can you use an SBA loan to buy an existing daycare?

Yes. Buying an established center gives you enrolled families, trained staff and an operating history a lender can underwrite. The SBA’s acquisition rules apply:

• Equity injection: at least 10% of the total project cost. Up to half can come from a seller note on full standby, meaning the seller receives no payments for the life of the SBA loan.
• Term: up to 10 years. If the building is part of the deal, the real estate share can stretch to 25 years.
• Cash flow: for a first-time acquisition, the center’s earnings must cover the new debt payments with debt service coverage of at least 1.25x.

Licensing is the daycare-specific wrinkle. In many states a child care license doesn’t transfer to a new owner, so you may need to apply for your own license and pass inspections before you can operate the center. Lenders often want a clear licensing plan, and some won’t close until licensing is resolved. Talk to your state licensing agency early and build the timeline into your purchase agreement.

Before you commit, review the center’s inspection reports and any violations, staff turnover and whether key people, especially the director, plan to stay. For valuations, seller notes and the rest of the process, see buying a business with an SBA loan.

Can you get an SBA loan to start a daycare?

Yes. The SBA treats a business that has been generating revenue for 1 year or less as a start-up, and start-ups need an equity injection of at least 10% of the total project cost. Because there’s no operating history, lenders usually expect:

1. Relevant experience, such as running or directing a center, or a qualified director on your team.
2. A business plan that covers local demand, competing centers, tuition rates and your planned licensed capacity.
3. Financial projections with a realistic enrollment ramp, showing the center can reach debt service coverage of at least 1.15x.
4. A licensing plan and budget for build-out, equipment and the months before you can enroll children.
5. Working capital to cover payroll and rent while classrooms fill.

Many child care centers operate under a franchise brand. To use SBA financing for a franchise unit, the brand must be listed in the SBA Franchise Directory, so check before you sign a franchise agreement. See SBA franchise loans.

Can you buy or build a child care facility with an SBA loan?

Yes, as long as your center occupies enough of the building: at least 51% of an existing building, or 60% of new construction. There are two main options:

• A 7(a) loan can include the building, on its own or with a business purchase, with the real estate share repaid over up to 25 years.
• An SBA 504 loan pairs a bank loan with a fixed-rate debenture from a Certified Development Company (CDC). A typical project is split 50% / 40% / 10%: bank loan, CDC debenture and your contribution.

Your 504 contribution depends on the age of your business and the type of property:

Your situation	Minimum 504 contribution
Established business, general-purpose building	10%
New business (operating 2 years or less)	15%
Special-purpose property	15%
New business and special-purpose property	20%

Definition

Special-purpose property: A building designed for one type of business that would be hard to use for anything else without major changes. Lenders and CDCs decide case by case whether a purpose-built child care center counts; if it does, the minimum contribution goes up.

Since July 4, 2026, a business can combine 7(a) and 504 financing for up to $10 million in total, which helps when you buy a center and its building together.

If you lease, a 7(a) loan can pay for build-out and renovations to meet licensing and fire-safety rules. Lenders generally want your lease, including renewal options, to run at least as long as the loan.

What do lenders look for in a daycare loan?

Lenders underwrite the center and you as its owner. Expect them to focus on:

• Licensing and compliance history. A current license in good standing, recent inspection results and how any violations were resolved.
• Licensed capacity and enrollment trends. Capacity caps how much revenue a center can earn, so lenders compare enrollment to capacity over time and ask about waitlists and the mix of age groups.
• Staffing. State staff-to-child ratios set how many teachers each classroom needs, which makes staffing a major cost. Lenders look at wages, turnover and the director’s qualifications.
• Tuition and subsidies. Lenders often ask how much revenue comes from private-pay families versus state child care assistance or public pre-K contracts, since changes in those programs can affect cash flow.
• Lease or property terms. The length of your lease, renewal options and whether the space meets licensing rules.
• Personal finances and ownership. The SBA sets no minimum credit score; each lender sets its own. Owners of 20% or more personally guarantee the loan, and since March 1, 2026, a business’s owners must be U.S. citizens or nationals living in the U.S.

How do you find lenders that fund daycare centers?

SBA lenders specialize. Some regularly finance child care centers and understand licensing, enrollment ramps and subsidy income; others rarely lend in the field. Starting with lenders that already fund centers like yours usually means fewer surprises in underwriting.

The SBA publishes public records of the 7(a) and 504 loans it guarantees, including each borrower’s industry (NAICS) code. SBA Loan Connect ranks lenders using those records by NAICS code, so you can see which lenders actually fund child care businesses before you apply. Partner lenders are clearly labeled. See how we rank lenders.