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Marissa Schneggenburger

Funding Opportunities for Opening a Childcare Center or Daycare

  • March 4, 2021

The childcare industry is full of passionate providers working to create a strong business in order to serve both children and families to the best of their ability. In order to start a childcare or daycare business, many providers need external funding. In some cases, funding is also needed for improvements and upgrades for childcare centers as well.

In a recent discussion, Kangarootime was joined by three Black ECE entrepreneurs who highlighted their struggles to receive funding for their start up cost for daycare or childcare business. This brought to light a greater issue that while there are opportunities for funding startup costs available, they’re not always well-known or accessible. In this post, we’re going to outline different ways you can receive funding for opening a child care center provider through loans, grants, credits, and more.

1. How to Get a Loan For Your Daycare or Childcare Center

A loan can be the most common way to receive extra funding for your own daycare business or child care center. This is also one of the most accessible options when starting a daycare since there are different avenues to obtain one through.

Your local SBA is a great resource as it helps support small businesses like a daycare facility or a home daycare business. The SBA connects entrepreneurs with lenders and funding to help daycare providers plan, start and grow their businesses.

  • Contact local community banks

Local community banks are a great option as their focus is on supporting the local economy.

  • Funding through non-traditional loans

“In addition to your traditional banks and SBA loans, there are also non-traditional loans you may qualify for from FinTech companies. They typically connect directly to your accounting software, banks, and sales platform for a determination of loan amount. The interest rates and/or fees are generally higher, but requirements are less stringent. Checkout Kabbage, Blue Vine, PayPal, Square, and Ondeck.” – Audra Wilson-Russell, CPA and Owner of WATS CPA.

2. Government Grants for Daycare Centers

There are government grants available to help child care providers who need financial assistance. This money can be used to cover renovation costs, equipment purchases, and labor and administrative costs.

The Community Development Block Grant program is funded by the U.S. Department of Housing and Urban Development. The program awards funds to projects in order to improve the living and economic conditions of communities. If you’re interested in participating in the program, contact your local municipal or county officials to find out how the program operates in your area.

Use this link to find out who administers the CDBG Program in your area. 

If your child care business is located in a rural area, you may be eligible for the Community Facility Grant Program. This program works to provide affordable funding to essential local businesses and community facilities that would finance the construction, expansion, and renovation of these facilities. Grants can cover up to 75% of the project costs and you will incur costs for other expenses such as a license and business insurance. For your center to be legal, you need to meet the requirements for child care providers set by the Department of Children and Family Services (DCFS). Child care businesses in cities, towns, and districts with fewer than 20,000 residents are eligible to apply for grants.

The Child Care Development Block Grant Act provides federal funding to states for child care subsidies for low-income families. The funds are granted to state and local government agencies and nonprofit organizations to subsidize the difference between the cost of families’ co-payments and the total cost of childcare. The financial incentives work to improve the quality of childcare for families and financially assist daycares in making modifications to their centers in order to meet the program’s requirements. In 2020, Congress increased funding for the grant by $550 million bringing the total fund up to $5.826 billion.

Other grants also allocate funds for variable expenses including food programs and Department of Education grants for eligible universities and colleges with daycare centers.

Helpful Hints: 

If your childcare center does accept subsidy payments from parents, Kangarootime’s Subsidy Billing Platform makes them easy to manage. Now you can track attendance, create billing plans, manage reimbursements, and more. To learn more about this tool, click here. 

3. Ways to Save Money and Increase Revenue at Your Childcare Center

  • Invest in a Software Program

Although it may seem like an added expense, investing in childcare management software will actually save your center money. These programs significantly reduce administrative expenses by saving hours each week by automating processes for your own daycare center. Now, you’ll receive your payments on time and in the correct amount through automatic billing cycles. Since these programs digitize your day-to-day processes, you also save on the cost of paper. Finally, these systems can help you boost enrollment and increase revenue by identifying gaps in your business. As a business owner, you’ll be able to see a clear picture of your variable costs and expenses and missed enrollment opportunities while also being able to have a better business plan for your financial future.

To learn more about choosing a CCMS right for you, check out this blog series from Kangarootime. 

  • Reassess and Redefine Your Daycare’s Budget

As a recommendation, your center’s finances should be broken down as follows:

  • Ideal Occupancy: 70-90% 
  • Staff costs: 50-55% of your income
  • Operating costs: 11-13% of your income
  • Facility costs: 22-25% of your income
  • Admin costs: 2-4% of your income
  • Profit: 15-30% of your income

This blog post will help outline how you can improve your budget at your center. 

  • Improve Your Marketing Techniques 

Marketing is crucial for your childcare center to increase enrollment, improve credibility, and showcase the value of your center. Here are some quick tips to improve your marketing techniques.

  • Utilize Social Media
  • Optimize Your Website
  • Start a Blog
  • Use a CRM (Customer Relationship Management) Platform
  • Connect to your Network
  • Host a Virtual Event

For more tips to improve your marketing strategy, click here. 

To learn more about increasing revenue at your center, click here to read an in-depth article from Kangarootime. 

Kangarootime is the leading all-in-one childcare management software for daycares and preschools. With billing and invoicing capabilities, parent communication and staff management tools and classroom automation, Kangarootime helps childcare centers grow and scale. To learn more about optimizing your center with Kangarootime, visit kangarootime.com.

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