Free
Day
Care
Center Business Plan
Obtaining Business Financing
When obtaining a business loan
for a day care center business, it is imperative that you have a properly
structured business plan that will assist you in showcasing how you intend to
operate your Day Care Center, how the business will operate, how you intend to
market the business, the anticipated financial results of your company, and how
you intend to repay your debt obligations. This sample loan business plan will
provide you with the framework that you need in order to acquire a business loan
for starting or expanding this type of business.
Executive Summary
Introduction
When obtaining a business loan
for a day care center, it is imperative that your business plan has a clear and
concise executive summary that provides an outline of what are seeking to
accomplish, how much capital you are seeking to raise, the management biography
of the business owner, and an overview of the anticipated profit and loss
statements of the business. Here is an example of how the title paragraph should
be written:
Day Care Center,
Inc. (“the Company”) is seeking a business loan of $100,000 in order to launch
the operations of a day care center business that will be based in
San Francisco,
California. The Company was founded in (Insert Year).
The business was founded by Mr. John Doe.
Products and
Services
In the next segment
of the business loan and business planning document, you should showcase the
products and services that you will be providing to the general public. For
instance:
The Day Care Center
will provide round the clock childcare services to the general public of
San Francisco. The business will serve meals, provide
basic educational services, and after-hours care services for parents that need
assistance caring for their children during daytime hours. At all times, the Day
Care Center will remain within the letter of the law regarding the sale of Day
Care Services especially as it relates to hiring individuals that work with
children.
Business Loan Terms
Now it is time to
discuss the anticipated terms of the business plan that you are seeking. An
example paragraph of how this is stated:
At this time, Mr.
Doe is seeking a conventional business loan in the amount of $100,000. The
interest rate, loan terms, and loan covenants are to be determined during
negotiation. However, this business plan assumes that the business will receive
a seven year business loan with a seven percent interest rate due on the
outstanding principal balance.
Management
Biography
Now that the
summary of the business has been provided, it is time to provide a brief
overview of the owner of the business. An example paragraph summing up the owner
is as follows:
Mr. Doe is a highly
experienced business person that has years of experience regarding the direct
ownership and management of business. He will be able to effectively bring the
operations of the Day Care Center, Inc. to profitability while ensuring that the
business loan’s payments and its covenants are met at all times.
Financial
Statements
The most important
thing to your lender when applying for a business loan is how you intend to
repay the bank. In this section of the business plan, you should provide an
overview of the finance’s of the business discussing the anticipated revenues,
expenses, and profits/losses. You can also discuss the applicable collateral
within the business plan that will be used to secure your business financing.
Expansion Plans
One of the most important
aspects of your business plan is how you intend to expand the business over a
three to five year period. Banks and finance companies always want to see that
the business will experience a moderate to strong level of growth. This is
especially true in business lending because as your business grows the cash flow
that secures your business loan will decrease proportionality against your
monthly credit obligations. An example of how this is stated is as follows:
The Day Care Center
will continue to expand through organic means including increasing the Company’s
advertising budget via the reinvestment into the after tax cash flows of the
business. Additionally, if the business is highly successful then the Company
may seek to establish additional Day Care Center locations after the third year
of operations.
The Financing
Use of Business Loan Proceeds
In this section of the business
plan you should focus on how the proceeds of the business loan will be used. An
example of this would be as follows:
-
Day
Care
Center Establishment - $50,000
-
Day
Care
Center Licensure and Professional Fees
- $10,000
- Working
capital - $40,000
Management Equity
In this section of the business
plan you should discuss the percentage ownership of the business among the
owners of the business. For example:
Mr. Doe will own
100% of the Day Care Center.
Board of Directors
When applying for business
financing, the bank will also want to know who serves as the board of directors.
For small businesses, usually the owner serves as the director of the business.
An example of how this is worded:
Mr. Doe will be the
sole director of Day Care Center, Inc.
Exit Strategy
Any bank or financing company
is also going to want to know what you intend to do with the business over a set
period of time. Many business owners will develop and expand a business with the
intent to sell the company to a third party at a later time. When drafting this
part of the business plan you should focus on what you intentions are in regards
to potentially selling the business. This is often worded as:
Mr. Doe would most
likely sell the Day Care Center to a third party for a significant earnings
multiple. Day Care Centers usually sell for approximately one to three times
earnings given the financial strength of the business. In this event, the
business would be sold by a business broker and the business loan sought in this
plan would be repaid according to the covenants of the business loan agreement.
Products and Services
When developing a business plan
that is appropriate for obtaining a business loan or other business credit
facility you need to clearly showcase the services or products that you will be
offering to the general public. An example of how this section is worded goes as
follows:
As stated in the
executive summary, the Day Care Center will provide a broad spectrum of daycare
services to the general public including round the clock support for parents
that cannot care for their child on a full day basis. The Day Care Center will
serve meals, provide general education services, and provide transportation
services for children when needed.
At this time, the
business is seeking to obtain the appropriate licensure to ensure that the
business can commence operations as soon as the
Day
Center receives the financing sought in this
business plan.
Industry and Market Analysis
The
Current
State of the Economy
It is important to let your
financial institution know that you are well apprised of the financial situation
of the general economy when you are applying for a business loan. This is
especially true in today’s environment where lending has become more difficult
and will remain more difficult in the foreseeable future. Specifically, you
should gear this section of the business plan analysis towards the industry that
you are operating within. For example:
The current economy
has remained difficult over the past few years. However, Day Care Centers
typically operate with a strong level of economic stability as parents will
continue to require to have their children cared for on a regular basis despite
the current state of the economy. As such, the Day Care Center will be able to
remain profitable and cash flow positive during any economic climate.
The
Day
Care
Center Industry
In addition to providing your
business loan officer with an understanding of the general economy, it is
important that you showcase that you have an equal understanding of the industry
in which you are operating within. As such, you will need to provide you
business loan institution of a brief overview of your industry and any potential
changes that may affect the way that your company does business. An example of
how an industry overview is as follows:
There are over
62,400 childcare establishments in the
United States. These businesses produce over
$18 billon dollars a year in gross receipts. Additionally, the business employs
over 628,000 people, and generates payroll figures of $7.2 billion dollars a
year. Approximately 42,000 of these businesses operate as for profit businesses
with the remainder of these companies providing services in a not-for-profit
setting, such as a religious institution.
The industry has
experienced a tremendous rate of growth over the last ten years. The industry
from 1999 to 2005 experienced growth of more than 18% over the five year period.
This industry is one of the fastest growing industries in the
United States. This is primarily attributable
to the extremely high divorce rate in this country. As single parent families
have become normalized, the need for daycare services has grown immensely as the
traditional nuclear family has become a rare breed. Additionally, many more
families are two income families, and as such, the need for daycare centers
among these demographics is immense.
Target Market
In this section of the business
loan application and business plan analysis, you should focus on the
demographics of your localized market (or national market if applicable). This
section should discuss how many people live in your area, the anticipated number
of people that would require the use of Day Care Centers, the median household
income of people living in the area, poverty line statistics, and any applicable
laws that would apply to your operation of Day Care Centers.
Competition
Many people that are developing
new businesses or expanding existing businesses often feel that their business
does not have any competition or limited competition at best. However, this is
almost never the case. Unless you have re-invented the wheel – you will have
competition. When applying for a business loan, you should clearly showcase your
competition in your business plan. This is especially important to your banker
as they will be able to gauge your ability to be successful in your targeted
market. Many business loan underwriters will aggressively confirm that
competitive nature of your local market and your local industry.
When drafting this section of
the plan you should heavily discuss the competitive advantages that you intend
to have over your competition.
Marketing Plan
In addition to all of the above
information that we have covered, your business loan officer is also going to
want to know how you intend to market your business to the general public. Most
people do not quite understand how to effectively market their business outside
of prominent signage or flyer distribution. When applying for a business loan
(again in this difficult lending climate), your banker is going to want to see
that you have a clear methodology of how you intend to market your services or
products to the general public. In this section of the business plan – we will
overview how to showcase your services/products to the general public.
Marketing Overview Example
- The Day Care
Center will place prominent signage on the facility to draw a significant amount
of foot traffic.
- The business
will maintain listings in the Yellow Books.
- The Day Care
Center will also maintain an internet website that showcases the Company’s
operations, hours of operation, and relevant contact information.
- The Day Care
Center will also work closely with local schools for referrals to the Company’s
services.
Marketing Strategies Overview
Additionally, you will be
required to further drill down (in your business plan) how you intend to
implement your strategies when you launch or expand your business’s operations.
In this section of the business loan and business plan documents, you should
amplify the bullet points from the section above. For instance:
The Day Care Center intends to use a number of strategies
that will create instant traffic and customer flow to the Company’s location.
These strategies include not only using prominent facility and road signage, but
also distributing flyers to people that fall into he Company’s targeted
demographics. The business will also regularly take out advertisements in
localized newspapers that showcase the Company’s hours of operations, day care
center services, and other information relating to the operation of the
Day
Care
Center.
The business will
also maintain a highly informative website that showcases the
Day
Care
Center’s services, its hours of operation, licensure
information, and other relevant information in regards to the Company’s
services. This website will be listed on major search engines such as Google as
many people now use the internet to locate local businesses such as Day Care
Centers. The business will also develop ongoing referral relationships with
local schools that have children that need after-hour childcare needs.
The Financial Plan
Beyond any other part of your
business loan application or business plan, the financials section of these
documents are what matters most when applying for a business loan or any other
type of credit facility. Ultimately, this section of the business plan showcases
not only what your anticipated profitability will be, but also how you intend to
repay the funds that you have borrowed through your business financing facility.
An example of how this section is structure is as follows:
Assumptions
- Day Care
Center, Inc. will have an average annual growth rate of 10% per year.
- Mr. Doe will
acquire $100,000 through a business loan in order to launch the operations of
the business.
Proforma Financials for a
Business Loan
Now it is time to showcase how
you intend to repay your loan, generate a profit, and increase the book value of
your business over a three to five year period. BusinessPlansForLoan.com has
developed an easy to use financial model that you can use when drafting out the
financial model for your business plan and business loan application. Through
your business loan application, you will be required to have the following:
- Profit and
Loss Statement for your
Day
Care
Center
- Cash Flow
Analysis for the
Day
Care
Center
- Balance Sheet
for the
Day
Care
Center
- Business Loan
Amortization Tables
Please see images below