Childcare Centre Finance
Childcare centres and services are beginning to see the light after a challenging couple of years as the industry bore the brunt of the COVID-19 pandemic.?Having worked on various transactions in the childcare space during the pandemic - and dealing with the breadth of challenges given heightened uncertainty - the post-pandemic environment is looking very different.
Lockdowns, family health concerns, ensuing financial pressures and staff shortages saw falling occupancy rates and temporary centre closures resulting in a significant, although short-term, reduction of yields.
Moving forward, business viability is currently underpinned by several favourable market conditions and predictions, including:
ONE: Social and Demographic Changes
The demand for childcare is on the up thanks to both population growth and the increase in the number of double-income or two-working-carer households.
According to the Australian Bureau of Statistics (ABS) in the 10 years from March 2011 to March 2021 there’s been a 7.7% increase in the number of children aged five or under attending childcare with 46.7 per cent of children aged 0-5 years in approved childcare.
Overlay this upward trend with a 9.9% increase in the?number of children aged under 3?by 2024, and a key target market is the fastest-growing proportion of the population.
Additionally, as more women than ever before return to the workforce, enrolments in early childcare and outside school hours care are set to further increase.
TWO: Massive Government Subsidies
The post-pandemic environment is calling for adaptation all round. While many parents and carers are revising the balance of in-office and work from home (WFH) arrangements, resulting in a demand for more flexible childcare options, others are re-evaluating the value of formal childcare in line with Labor’s $5.4 billion proposal for universal childcare. This proposal aims to increase family subsidies to the tune of 90% (for the first child) for all families (with no income cap) and is projected to facilitate easier access to childcare for even more families as of July 2023.
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In fact, Anne Aly, the Minister for Early Childhood Education, has indicated the government will contemplate fast-tracking the policy to provide more immediate relief.
THREE: Banks are chasing Childcare Business
Favourable market conditions, including proposed healthy government investment, are influencing appetites for childcare centre lending and we are starting to see some lenders introduce incentives and more flexible lending criteria, such as reduced establishment fees, specifically for childcare centre operators. ?An experienced commercial finance broker with a proven track record in childcare centre finance will know exactly what each lender has on offer.?
How to secure a better finance deal for your childcare centre
How the bank or lender calculates the interest rate and fees you will pay is assessed based on perceived risk, sometimes referred to as a Risk Grade. Your loan application will be graded based on several risk factors, including (but not limited to):
The higher the bank’s perceived risk of your business, the higher the all-up rate or cost of your funding. It’s important to note that every lender will weight risk factors differently and can change their policy regularly.
You will be more likely to save money, if your finance broker has a proven track record in childcare centre funding and a thorough understanding of current business lending policies from a range of banks and lenders. Marquee Group has been fortunate enough to facilitate finance on various childcare centre transactions.
Reach out if you want to know more...