Unfortunately, the answer to the question “How much money do I need for a down payment?” – The question is one that many people learn the hard way. Here we make it easier for you. The amount of down payment required for the purchase of a child care, daycare, Montessori, preschool, or special needs school business is primarily determined by the following four factors:
1. Your credit score.
two. Your work history.
3. Whether or not you are buying real estate with the business.
Four. The lender you choose to make the loan.
All right… here we go.
Your credit score in this market must be 700 or higher. In some cases, your score may be in the high 600s as long as there’s a good reason for it, but ideally you and your partners should have scores averaging around 700 or higher.
Next, your work experience can be separated into four levels.
has. Buyers who have owned at least one center for three years or more should anticipate a 10-15% down payment.
b. Buyers who have three or more years of experience in the education industry but have not owned a center or school should expect a down payment of around 15%.
against Buyers who do not have experience in the education sector, but have a strong career in a field related to children or education, such as a pediatric nurse, child psychiatrist, dentist, children’s clothing designer, etc. You should expect a down payment in the 15-20% range.
d. All other buyers should expect a 25% down payment.
Third, if you are buying a child care business with real estate, then your down payment amount will be less than if you are buying a child care business without real estate. Your financing term will also be longer if real estate is included in your purchase. Assuming you’re using an SBA loan (most people do), your term will be a maximum of 10 years if you’re buying a business without real estate, but the term can be up to 25 years when you include the property .
Fourth, the bank or lender you choose to lend to can have a significant impact on the cost of your loan. The costs include the amount of cash you have to put down for a down payment, as well as your interest rate, the points on your loan, the amount of time it takes for the bank to close…etc. Banking requirements may vary materially. It is always best to compare banks against each other to make sure you get the best results. Remember, a quarter point difference in interest rates means a lot of money for you over the life of your loan. Finally, banks that have worked with and understand our industry are more likely to provide you with better terms.
While there are certainly other factors that will affect your loan approval, successfully covering these four will get you most of the way.
(Disclaimer: Always consult the appropriate professionals before acting. By and prior to the use of the information provided in this document, the reader agrees that BFS® is not responsible for the actions of the viewer related to said information.)
