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. We can make it easier for you here. The amount of the initial payment required for the purchase of a child care business, daycare, Montessori, preschool, or school with special needs is primarily determined by the following four factors:
1. Your credit score.
2. Your work experience.
3. Whether you are buying real estate with the company or not.
Four. The lender you choose to make the loan.
In order … here we go.
Your credit score in this market must be 700 or better. In some cases, your score may be in the high 600 as long as there is a good reason for it, but ideally you and any partner have scores that average around 700 or more.
Your work experience can then be divided into four levels.
For. Buyers who have owned at least one facility 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 approximately 15%.
vs. Buyers who have no experience in the education vertical, but have a solid career in a field related to childhood or education, such as a pediatric nurse, child psychiatrist, dentist, child garment maker … etc. you should expect a down payment in the range of 15-20%.
D. All other buyers should expect a 25% down payment.
Third, if you are buying a child care business with real estate, 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 are using an SBA loan (most people do), your term will be a maximum of 10 years if you are buying a business without real estate, but the term can be up to 25 years when property is included. estate. .
Fourth, the bank or lender you choose to make the loan can have a significant impact on the cost of your loan. The costs include the amount of cash you have to use for the down payment, as well as your interest rate, the points on your loan, the amount of time it takes the bank to close … etc. Banking requirements can vary substantially. It is always best to compare the banks with each other so that you can be sure of getting the best results. Remember, a quarter point difference in interest rates means a lot of money to you over the life of your loan. Lastly, banks that have worked with and understand our industry are more likely to give you better terms.
While there are certainly other factors that will affect your loan approval, meeting these four successfully will take you most of the distance.
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