Starting a daycare is one of the most rewarding opportunities out there. Ignoring the normal financial benefits of starting a business, daycares take up a unique spot in the business world. Daycare owners have the opportunity to improve the lives of children and improve their community, all while soaking in the benefits of coming in contact with children daily.
The four proven methods to start a daycare with no money are:
Method One: Work Your Way Up
Method Two: Grants
Method Three: Loans
Method Four: Angel Investor/Partnership
While it is not entirely possible to start a daycare with absolutely no startup costs, securing funding to cover these costs can easily be broken down into three steps. Read on to learn what should be included in your daycare business plan, where you can find different funding opportunities, and how you can start your daycare with no money.
Your Options for Starting a Daycare with No Money
While having funds makes starting a business easier, it is not required. Plenty of entrepreneurs start their ventures with no funding, and there are a few routes to go from here. Each route leads directly to where you want to go, but they can also be used in conjunction with each other.
Route One: Work Your Way Up
If you are not keeping yourself on any set time frame, or you are fine with putting off your dream daycare for a year (or more), taking time to work up and save money can give you time to make setting up a larger business easier.
This route still requires licensing and registration, but you can start with no absolutely no funding by babysitting for friends or family to save up for any legal fees.
Keep in mind that regardless of who you work for, you should keep track of anything paid out to you for tax purposes.
Route Two: Grants
Grants are sums of money set aside by organizations or government agencies given to individuals, businesses, or other organizations for specific purposes.
Because daycares serve as a necessary community function, there are plenty of grants available for daycare centers and providers. These are amazing opportunities because there is no repayment requirement, so it is stress-free money given to you to serve your daycare needs.
The grant process is a competitive one. It is not something to go into with minimal effort, but the reward is great.
Route Three: Loans
Compared to grants, loans are not the most ideal funding option to put yourself in. They are not as exclusive as grants are, but you will need to pay them back.
That being said, loans are often an essential part of every business. They can be an easier way to fund your venture. While it is best to avoid paying interest (in any aspect of your life), starting your daycare can be much more rewarding.
Route Four: Angel Investor/Partnership
If there is someone in your community who would be able to fund your daycare business, there is no harm in contacting them offering an opportunity to invest.
Angel investors handle your financial issues for a share of your company. Your angel investor can be a businessperson in your community or a friend or family member that you would like to go into business with.
As long as everyone is okay with the partnership and its terms, finding an investor can be a great opportunity.
Bare Minimum Expenses
Because of licensing, starting a legal and legitimate daycare will always require some sort of capital. This usually is not a lot of money, but it varies depending on your location, and you might be able to get these paid for if you set up your daycare in conjunction with government or community needs.
Expect to pay for:
- Business permits
- Licensing fees
- Incorporation costs
Coming up with Your Business Plan
If you want your daycare to succeed you need to start with a business plan, regardless of what you intend to do with your business and how you intend to fund it. Business plans give you something to tap into every time you need to make a decision, and they help you outline a budget.
Even if you are planning on starting off babysitting or nannying and saving up, writing out a business plan gives you the structure you need to keep your daycare consistent. At the very least, you should write up the skeleton of a business plan.
Your business plan should include:
- An executive summary
- A company description
- Markey analysis
- Company structure
- Your funding request
- An appendix
With grants, your business plan will look a bit different, and it will be referred to as a “grant proposal”. While grant proposals generally include the same things, they are not as stringent on things like market research, marketing plans, company structure, or financial projections.
Each grant is different, and you will need to make sure your proposal speaks directly to what they are intending to fund.
Let’s go over these basics.
Your executive summary explains what your company is and why you know it will be successful.
In your company description, you will expand on your summary.
List out any problems you solve and get as specific as you can. If finding affordable childcare is a known problem in your city, this is where you point that out.
Your company description should also go over who will use your services, including parents, schools, and any government entities.
This is where you prove that investing in your business is a good idea. Daycares have the benefit of being intrinsic to society; they will always be needed.
Research specific trends for your area. At this point, it might be useful to poll your area.
- What percentage of parents need childcare?
- Is finding affordable childcare in your area difficult?
You should also analyze how other daycares in your area function.
Explain the structure of your daycare, both legal and management.
Most daycares, both center and home-based, using a Limited Liability Company (LLC) structure. This keeps business finances and legalities separate from personal ones.
Regarding management: this is not a big thing to figure out if you are setting up a home-based daycare, but it is important to look into your local and state requirements for childcare. You need to stick to their guidelines as a minimum.
Here you would include what services you will provide. Examples of this are:
- Age groups, you will work with
- The curriculum you will offer (i.e. Montessori)
- Extended days/hours (i.e. before/after school, weekends)
- Religious affiliation
How will you attract new customers? At this age, establishing your daycare online and setting up a social media page is a minimum. It is also a cheap, easy way to reach new customers.
Word of mouth works great for most daycares, but you can also pay for newspaper ads or billboards, set up flyers in local businesses, or even run some community events to attract people.
Your funding request should not be the focal point of your plan or proposal, but this needs to be executed perfectly.
A funding request should show those you are asking for money that you have thought about your request extensively. Outline exactly why you are asking for the amount you are asking for and any funding opportunities you have already secured.
It is a great idea to have an itemized list so the person reading your plan knows exactly where the money will be going.
If this is for a loan you should also describe how long it will take to pay back the amount in conjunction with your financial projections.
The appendix is where you store any other relevant information.
For loans, this can look like credit histories or records of business experience.
For grants, these can be relevant awards or acknowledgments.
Either way, your appendix should include any documentation related to your business.
- Licenses and permits
- Secured funding
Learn more about government grants HERE.
Utilizing Your Business Plan
If you plan on working from the ground up you can skip this part, but this will probably be useful information later on.
The most stressful part of starting a daycare with no money is securing the necessary funding. It looks different depending on which route you decide to go.
While the process for investors is no more elaborate than already discussed, we can go over finding and securing grants and loans.
Before you do anything else you should determine whether you have (or will have) a nonprofit status. Nonprofit daycare centers have more grant opportunities out there than for-profit daycares.
Despite the name, a nonprofit daycare center still offers the opportunity for profit; there are stricter guidelines on how they operate, pricing, and compensation rates. Nonprofits must also have a board of directors (yours can be made up of parents and other involved individuals).
When you are looking for grants you will have the most luck looking with government agencies.
Now that that is out of the way, search for grants that you qualify for. The easiest way to do this is by contacting appropriate government agencies and organizations.
Agencies that are affiliated with childcare include:
- Childcare and Development Fund
- Social Services Block Grant
- Child and Adult Care Food Program
- Even Start
- US Department of Health and Human Services (specifically the Child Care Bureau)
These agencies should be able to direct you to any grants available for your situation. When you have information on the grant make sure you request specific information on each grant’s process. You need to know what they want their proposal to include and what deadlines you need to meet.
Other helpful resources:
HHS Office of Child Care – This website has expansive information on licensing requirements, funding opportunities, and other resources for child care providers.
Child Care Agencies (by State) – Your state lead agency will be incredibly helpful in telling you what funding is available to assist you in starting a daycare.
Child and Adult Care Food Program – Provides reimbursement for nutritious meals and snacks.
National Database of Childcare Regulations – This makes searching for your state’s specific licensing requirements and agencies a lot easier.
Searching for loans is a lot less complicated than searching for grants.
Lenders can be found almost anywhere, but your best place to look is the United States Small Business Association. They have the widest variety of loan opportunities available to small businesses.
Alternatively, your local bank may be able to offer you a decent rate, and any financial credibility you have with them can be useful.
If it comes down to it, searching for loan opportunities online can be fruitful; it just should not be your first step. You typically will not receive as good an offer as you would with an SBA loan.
While the loan process can be daunting (especially when discussing repayment or looking at interest costs), loans can be a great opportunity to get your daycare on its feet regardless of whether you have money or not.
Starting Your Daycare
Once you have your business plan and funding you can take action.
You should have a secure location to host your daycare, whether it is a facility or your own home.
Use your funding to purchase the items necessary for the function of your daycare. You can cut costs by shopping for secondhand supplies or seeking out donations. Regarding computers, the US General Services Administration will often distribute surplus federal property, including computers.
Make sure everything is childproofed, especially if you are working out of your own home. Utilize safety materials like outlet covers, doorknob covers, furniture anchors, and baby gates. It is better to be more cautious than not.
If you will be hiring staff, make sure you perform background checks. Teenagers and college students make fantastic care providers, especially if they are passionate about child care and education. You may also be able to provide volunteer opportunities for them, which is a mutually beneficial arrangement.
If your state requires insurance make sure you have it. Even if your state does not require it, you should get insurance. This will make sure you are protected in an accident, but also that your employees and children will have the best opportunities should one occur.
After your daycare is set up you can advertise. Make sure you list it in every directory you can whether it is in print or online. Starting a social media page makes it easy to keep the community updated on your business.
Flyers or business cars in local businesses can go a long way. You should always have an open house so that parents and guardians can tour your facility and meet anyone who will be taking care of their children.
After this point relax and make sure you are prepared for your very first day running your daycare!
This article has been a bit of a journey, so allow me to recap everything.
You have four options when starting a daycare with no money:
- Working your way up from babysitting to owning a daycare.
- Utilizing grants that do not require repayment.
- Obtaining financial loans, which do require repayment but get you to your dreams faster.
- Splitting your business with a partner or an investor.
A legal daycare will always need to spend money on legal fees like licensing and registration.
A well-written business plan or grant proposal is going to be key in your ability to start daycare when you have no money. The plan or proposal requires no money to write it up, only time, research, and effort. This is where all your energy should go.
Once you have that written up you can seek out specific financial opportunities and tweak your plan to meet any specification. Once you have the funding you can move forward to the fun part: setting up your daycare.
The process is not nearly as streamlined as it would be if you could fund the daycare the moment you thought it up, but it is rewarding nonetheless.
Should I write my grant proposal?
Because the grant process is so competitive, it is usually a good idea to have a professional write your proposal. This is not feasible if you have no money, so a better option is looking for free grant writing assistance online. Run your proposal by friends and family before submitting it.
Do I need licensing to start a daycare?
Legally, yes. The proper licenses and registrations are important for any business, but they are especially necessary when the care of children is involved. If you do not have the funds to acquire the proper licensing you should not start a daycare. (This is where I suggest you babysit or nanny; neither requires licensing.)
Is it a bad idea to start a daycare without any money?
Not at all! Daycares are necessary for society to function, now more than ever. If you are passionate about starting a daycare you should not let a lack of funding stop you. Just be prepared to jump through more hoops than you would otherwise, and let your passion fuel you moving forward.
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.
To learn more on how to start your own daycare checkout my startup course and documents here.