Childcare CFO / Paying for it
A bank is not deciding whether this is a good business. It is deciding whether the paperwork shows enough money left over to cover the payments. Those are different questions, and only one is on the application.
An owner came to me after four banks had turned him down. Profitable business, three years of clean tax returns. He had decided nobody would ever lend to him.
The business was fine. The paperwork was the problem.
His returns had been prepared to keep his taxes low, which is exactly what a good accountant is supposed to do. Every deduction taken. Every legitimate expense run through the business. But every one of those deductions also made the profit on paper smaller, and the profit on paper is the only number the bank gets to count.
They wanted to see a dollar twenty-five coming in for every dollar going out to the loan. His paperwork showed ninety cents. Same business, same performance, a story written for the tax man and handed to a banker.
Since March 2026, SBA requires that the business borrowing the money be entirely owned by U.S. citizens, U.S. nationals, or lawful permanent residents. If any share of your company is held by someone who is not, the loan is off. No partial credit.
This one depends on who owns your company, not on the center you are buying. So it can come up very late and undo a deal that looked fine all the way through. Check it first, before you spend money looking at anything.
What the bank looks at
Most people call about financing when the clock is already running. The seller wants to close, the bank wants documents nobody put together, and choices that existed two quarters ago are gone.
Know your own numbers before a bank calculates them for you. Know which adjustments you can defend and have the paperwork to back them up. And understand that your tax return and your loan application are two different arguments built from the same facts.
That is the whole difference between four rejections and a funded deal on the same business.
Questions
Yes. SBA 7(a) is how most childcare purchases in this size range get financed, and banks are generally comfortable with the business because they understand it. The hard part is almost never the fact that it is a daycare. It is whether the center's records show enough money left over each year to cover the loan payments after you account for the cost of running it.
The rule of thumb is a dollar twenty-five coming in for every dollar going out to the loan. Banks call that debt service coverage, or DSCR. The catch is what counts as money left over. If the seller works as the director and paid herself very little, the bank subtracts what a real director costs before doing that math. Plenty of childcare deals fall apart right there, on a business that is genuinely making money.
Most often because the tax returns were prepared to keep taxes low, which is what a good accountant does. Every deduction taken makes the profit on paper smaller. Smaller profit on paper means less money the bank can count toward the loan payment. The business is fine. The paperwork is telling a story built for a different purpose. Fixing that is a documentation job, not a rewrite, and it has to happen before you apply rather than after they turn you down.
Since March 2026, everyone who owns any part of the business borrowing the money has to be a U.S. citizen, a U.S. national, or a lawful permanent resident. If any share is held by someone who is not, the loan is off. There is no partial credit and no working around it. Because it depends on who owns your company rather than on the center you are buying, it can come up very late and undo a deal that looked fine. Check your ownership before you spend money on anything else.
Six months to a year is comfortable. The work is showing clearly how much money the business really makes, getting the records into a shape a bank can follow, writing down why each adjustment is fair, and confirming who owns your company. None of it is hard. All of it takes longer than the gap between finding a center and needing to close.