Nursery funding

Like all educational organisations, day nurseries suffered badly during the COVID-19 pandemic.

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However, since the re-opening of the economy, demand for childcare places has ballooned to all-time highs. Furthermore, with 69% of UK mothers stating that reliable childcare is their avenue back to work, and 40% saying that good quality nurseries are the key, it’s clear the current boom is not a fleeting blip, it’s a long-term trend. 

Why start a nursery?

All in all, there’s never been a better time to start a new childcare nursery. However, securing premises, hiring staff, meeting regulatory demands and establishing your nursery brand all cost money. Without sufficient funding, your big idea may remain nothing more than a dream. But not to worry. Specialised finance to start and support day nurseries is available. No matter if you wish to buy a business or a building, or just cover daily overhead, there’s a nursery loan to suit your needs. Read on to find out more about nursery funding and how it can make child’s play of setting up your childcare centre.

Setting up a nursery

Setting up a nursery can be emotionally and financially rewarding for those who prepare thoroughly and follow a solid plan. Follow these key steps to get your nursery venture off the ground:

  1. Research the qualifications you may need – and if you don’t have them, what are the steps to secure them?
  2. Establish what kind of day nursery you intend to operate – will it be a private for-profit facility, will it be a non-profit charitable organisation, or do you opt for a state-funded operation that’s attached to a school?
  3. Do the economics add up? Can you finance the project? Where will funding come from? Are the finances viable in the long run?
  4. Which government regulations apply to you? Can you meet them?
  5. Find premises that will provide you with the space and features your plan needs.
  6. Compile a strong business plan – lenders will ask to see this.
  7. Apply for funding – loans, grants, venture capital.
  8. Start building your brand early – begin your marketing activities well before you open for business.

What funding options are available for nurseries?

Nursery funding falls into three main categories:

This is a business property loan used to buy real estate and develop and renovate premises. Commercial mortgages function like a standard residential mortgage, with the lender providing a percentage of the purchase price and the borrower repaying the loan over 1-25 years. However, unlike standard home loans, commercial mortgages are offered on a case-by-case basis and the lenders will require a solid business plan as well as the usual property, credit, and security checks. 90% of LTV (loan to value – a comparison of the size of the loan to the value of the property) may be obtained, depending on the borrower and property profiles. The lender will take a legal charge over the property as security.

Finance that works like a lease. Used to buy plant, machinery, vehicles, (such as a nursery bus). You use the asset as you pay for it, and the asset functions as security for the loan.

Finance to cover dips in cashflow and unexpected expenses. Can be used to pay salaries, cover rent, taxes, utility bills, building repairs, office equipment, etc. Depending on the sum borrowed, this type of lending may be obtained without providing security.

Who is eligible for nursery funding?

Nursery finance is business finance, which means that although anyone can apply for nursery funding, relevant industry experience may be required by some lenders. Additionally, if you intend to run the nursery as the business owner but will leave the daily management of the facility and the teaching of the children to your staff, you do not need any technical qualifications to participate. However, if your goal is to be more closely involved with the business, for example acting as the facility manager, you must have been a nursery nurse for at least two years, have held a supervisory role for one to two years, and hold a relevant nursery qualification. Find out more about the qualifications you need to manage a nursery here.

How to choose the right type of funding

Depending on your goal, you may apply for different types of nursery funding. Each will have their own borrowing limits, terms and conditions and application criteria. If you are not sure which type of loan is best for you, you should seek professional advice before submitting your request. To find out more, please contact Swoop

What evidence do I need to provide?

Documentation requests will vary from lender to lender, but required information may include:

Industry experience

Business lenders may prefer to support borrowers who have a proven track record in their field, but that does not mean first-timers cannot obtain a nursery loan. Inexperienced borrowers who present a strong business plan and have the necessary financial support, may still secure the funding they need. However, their elevated risk profile could mean they pay higher fees and interest than a seasoned industry professional. 

Business plan

Your business plan is essential, and you should make it as strong as possible. Lenders will not know you personally, so the case you present in your plan must convince them that you are a good risk for their funds. If necessary, engage the services of a nursery planner to help you build this document. 

Lenders will pay close attention to the following:

  • Financial projections, cashflow forecast, balance sheet.
  • Executive summary of the project.
  • Exit plan – what do you intend to do with the nursery in the long-run?
  • Qualifications if you have any.
  • Key staff you are seeking to engage and their nursery experience.
  • Marketing plan.

Deposit

Depending on the type of loan, do you have proven funds to cover the deposit? Some lenders like to see that deposit cash has been in your account for 3-6 months prior to your application, (this is called seasoned funds). They may also like you to have a cash surplus to cover unseen costs or dips in revenue.

Personal finances

Is your personal credit good? Although it is possible to secure funds with weak credit, or if you’ve been turned down elsewhere, the better your personal finances are, the better your funding offers will be. Weaker credit could mean paying higher interest and fees or providing added collateral.

Top tip: Check your personal credit report before submitting a loan application. Errors on your report could deny you the funding you need. Find out how to view your annual credit report for free here.

DBS check

Employers may ask for a DBS check on potential employees from the government’s Disclosure and Barring Service. These checks will reveal if a candidate has a criminal record, or if they have been barred from certain roles or industries. DBS checks are routine for anyone who works in care, nurseries, schools and other facilities where vulnerable people congregate, but business lenders should not request a DBS check as part of your loan application.

How to apply for funding

With mandatory government regulation, and many safeguarding rules to adhere to, owning, starting, or managing a nursery can be challenging. Which means the last thing a nursery entrepreneur needs is a difficult loan process. Making applications to one lender after another is time consuming and can lead to disappointment and disillusionment. Instead, working with a broker who can access many types of nursery loan from a wide range of lenders with just one application, is a better way to go. No more cold calls and endless demands for information. Simply indicate your funding needs, tell us about your plans for your nursery, and leave the rest to us. 

Get started with Swoop

No matter if you’re taking baby steps to set up your first nursery, or you’re a seasoned professional seeking to expand your established childcare business, we have you covered. Get the right loan, the best rate, and the best terms for your nursery. Contact Swoop today.

Testimonials

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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