How to get funding for your Childcare Business

These days more than ever before, parents need childcare for their kids. That means, it’s a good time for starting up your own childcare business. But, all businesses require money to get up and running. So, we’re going to talk about startup money right here.

Let’s take a quick look at how to get funding for your childcare business. There are several avenues you can look into. We’re going to list your main options in the order of most ideal to least.

1. Grant programs.
2. Private funding.
3. Government loans.
4. Commercial bank loans.

But, before you go knocking on any doors asking for money, you need to layout a good business plan first. That’s why we’re going to take a quick look at what should be in your business plan in order for you to succeed in getting the funds you need.

What You Need in a Business Plan

For starters, you need to prepare a highly detailed traditional business plan to present to possible lenders and investors. There’s a lean version of a plan you can do, but you’ll run the risk of investors asking for more information if that’s what you bring to the investment meeting. Go with the traditional format to be safe.

Here are brief descriptions of what you need to include:

• Executive summary – What your business is, how it will grow and succeed, and projected financial information.
• Daycare description – Show how your business will be a solution to a problem in your community. Who will your business serve?
• Industry analysis – Show you know about the market you’ll be a part of. Discuss information about your competitors.
• Company structure – Talk about what legal structure you’ve chosen. Layout your management plan and how you will be running the childcare business.
• Marketing strategy – How are you going to reach potential customers? Detail how you’re going to attract new families and how you will retain the ones you have.
• Request for funds – Explain how much money you need and how you will be allocating that for up to 5 years. You need to outline what the terms are that you’re looking for, also.
• Financial projections – A more detailed look at the financial future of your childcare business.

Now, let’s look at who you’re going to be targeting with your business plan.

Grant Programs

The first place you should start looking is into grant programs run by various types of agencies. You’ll find programs like this that are run at both a state and federal level. In some cases, you can find grant programs that are provided by private establishments, as well.

The reason we placed grant programs at the top of the list is because you don’t have to pay these back. Most of the time, grants are given to non-profit foundations. However, exceptions are made when it comes to businesses like daycares because of the nature of the work. Caring for children so families can make a living is something there are some grant programs targeted toward in the world of for-profit businesses.

One thing you’ll want to look out for is any notice about lists you can have sent to you in response to your Internet searches that will provide you with leads for finding applicable grant programs. They will charge you a fee for the list, and it’s usually a scam. If you do your research, you’ll see you can find listings for these programs that are absolutely free.

Private Funding

Private funding can mean a couple of different things. First, you can reach out to friends and family you know who may want to help you out by lending you the money to get your childcare business started. This is one of the most popular types of private funding and it’s not a bad idea, other than you need to be careful when you’re doing business with family members. We’ve all heard the stories of these arrangements going bad, but if you make a deal and document it so that both parties have something to adhere to, then you can avoid any negative outcomes.

What’s great about getting loans from friends or family is that you can usually enjoy more flexibility. There are no limitations on how much you’re allowed to get from them, you can usually negotiate terms easily, and there is a bond that doesn’t exist between you and a commercial entity. They may already feel they can trust you, so you’ll have that going for you. Some family may even gift you the money. But, we don’t recommend having that as an expectation.

You can also set up a crowd funding page to see if you can raise the funds that way. This is still private funding, however, instead of one or two people lending you a large amount of money, a large amount of people can each lend you a small amount of money. You’ll likely want to offer those who donate some sort of incentive like a discount or a free gift.

You could also approach an angel investor or venture capitalist. This is probably going to be the most difficult way to find funds for your childcare business, though. It’s not likely that these kinds of investors will fork over money for a daycare, but if you have an in, it might be worth a shot.

Government Loans

These loans are different than bank loans in that they usually come with better terms and are easier to qualify for. You can look into these at all levels of government—local, state, and federal. All of them set aside money for the financing of small businesses. Most of the time they will be long-term loans, which is good for a startup that’s probably not going to see real profits for a while. You’ll likely have to provide some form of collateral for these loans, though, as states like to have some security.

One thing you can do is reach out to the Small Business Administration for help with information about any of the loan programs there are in your area. They’ll point you in the right direction, as well as provide you with details about what you need to have ready for your meeting in terms of qualification requirements.

Commercial Bank Loans

Your local bank most likely has a commercial department that issues loans to businesses. You will need to have good personal credit for any bank to grant you a business loan. You’ll also have to have something to put up as collateral. Commercial bank loans are tougher to qualify for. Your business plan is going to need to be stellar and well-thought out. You will really need to be able to show that your business can succeed and that it’s not going to be a huge risk for the bank.

The terms of the loan will be based on what the interest rates are at the time. You won’t have much say as to how and when you’ll be paying the money back. You may also encounter several other types of restrictions that were created in the interest of protecting the bank. They can put restrictions on how you use the money, how much you’re allowed to allocate to certain things, and more. Make sure you know what all of the restrictions are before signing on the dotted line for a commercial bank loan to start your childcare business.

It’s Up to You

We can’t tell you what the right avenue is for you to try and secure funding for your business. All we can do is show you some options, point out the ups and downs of them, and give you a little background information on them so you know what to expect. The rest is up to you. You know who you are and what your business is going to look like. For instance, you may know that you’re going to open an in home daycare. That won’t require the same amount of funding as a full fledged daycare center. There are also different regulations governing both of those. Some of those regulations may require more money for you, or not. In any case, tailor your quest for funds to what is right for your childcare business.

Final Thoughts

We’re living in unprecedented times. Times where childcare needs are at the forefront of issues that families are facing right now. So, your idea for starting your own childcare business probably has never been needed more.

That being said, you can’t open any kind of business without funding to do so. You can get those funds, though. The money is out there with agencies that are available to help people like you with ideas like yours. Whether you decide you want to pitch for grants, private investment money, government loans, or commercial bank loans, just make sure you have all your ducks in a row with a solid, detailed business plan. Then, it’s very likely you’ll be able to secure the funding you need to start the childcare business of your dreams.

Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.

Ready to get started? Checkout our startup course and documents here.

Meet Shawn Chun: Entrepreneur and Childcare Business Fan.

I’m a happy individual who happens to be an entrepreneur. I have owned several types of businesses in my life from a coffee shop to an import and export business to an online review business plus a few more and now I create online daycare business resources for those interested in starting new ventures. It’s demanding work but I love it. I do it for those passionate about their business and their goals. That’s why when I meet a childcare business owner, I see myself. I know how hard the struggle is to retain clients, find good employees and keep the business growing all while trying to stay competitive.

That’s why I created Daycare Business Boss: I want to help childcare business owners like you build a thriving business that brings you endless joy and supports your ideal lifestyle.