What do lenders assess on a childcare centre loan?

Every centre operates under a service approval issued by the state regulator, and the operator must be an approved provider under the National Quality Framework. Lenders ask for both, and for any compliance notices, conditions or enforcement actions. A centre that has had its approval suspended, or is operating under conditions, will struggle to attract mainstream finance until the issues are resolved.

The National Quality Standard rating (Working Towards, Meeting, Exceeding, Excellent) is public and lenders read it. Meeting or above is what they want. Occupancy is the other core number: licensed places tell you the capacity, enrolments tell you the reality. A 90 place centre running at 60 places is a different risk from one running at 85. Lenders look at occupancy by room and by day, because a centre full on Tuesday and Wednesday and empty on Friday is not a full centre.

Fees per day and the mix of families matter because a large share of childcare revenue is paid through the Child Care Subsidy. Lenders want to see the subsidy being received on time and the gap fees being collected. Bad debts on gap fees, heavy discounting and reliance on a single employer or referral source all get noted. The operator's financials are assessed for rent cover: lenders like to see the business able to pay rent at least 1.5 times over from earnings.

Finally the lender assesses you: experience in early learning or in commercial property, other borrowings, personal credit history and the strength of the guarantors. First-time investors buying a leased centre with a strong tenant are fine. First-time operators buying a centre to run themselves face a much harder assessment, and lenders will want to see who is managing the centre day to day and their qualifications.