Family day care vs long day care: how does the finance differ?

A family day care educator is registered with an approved provider and cares for up to seven children in their own home. The house is a house. Lenders finance it as an owner-occupied residential property, which means standard home loan rates, LVRs up to 80 per cent without LMI and higher with it, and the normal residential assessment. The business income is assessed as self-employed income, usually on two years of tax returns, and lenders check that council permits home-based childcare at the address.

Where it gets interesting is the property itself. Lenders can decline or reduce LVR if the home has been modified so heavily for the business that it is no longer a normal residence, or if the zoning and use are inconsistent. Keeping the house a house is the rule.

A long day care centre is a service approved under the National Quality Framework, with licensed places, ratios, staffing and a purpose-built or converted premises. It is commercial property. The loan is secured on the centre, sized on its rent and lease at 60 to 75 per cent LVR, and priced at commercial rates. The operator's business is assessed alongside the building. Everything else in this section is about long day care.

Outside school hours care usually runs from school premises the operator does not own, so there is no property to finance; the business is funded with a business loan against cash flow. Standalone kindergartens and preschools that own their premises are financed like long day care centres. Occasional care from a community facility is normally not a lending question at all.