Childcare Business Loans: How to Finance Buying a Childcare Centre
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Childcare Business Loans · Deposit by Deal Type · Approvals and Settlement
Buying, building or refinancing a childcare centre is a commercial deal, and the loan depends on whether you are buying the operating business, the property or both. This guide follows the buyer from first offer to the first months after takeover: deposit by deal type, due diligence, lender assessment, valuation, provider and CCS approvals, contract timing, staff and working capital at handover, and what can cause the finance or transfer to fail.
Quick Answer
A childcare business loan can fund the operating business, the freehold, a leased investment or a new build. Cash needed at settlement is more than the deposit: allow for duty, costs, working capital and the payroll handover, and expect the approval process, not the loan, to set the settlement date.
Also called: childcare centre finance, child care centre loans, early learning centre finance. The industry calls them early learning centres; the regulator's service type is centre based day care. They mean the same asset here.
What is a childcare business loan?
A childcare business loan is a commercial loan to buy, build or refinance a childcare centre or the property it runs from, and what a lender will do depends first on what you are actually buying. You might be buying the operating business on a lease, the building with the business trading in it, the building as a leased investment, or a site to build on, or you may already own a centre and need to refinance or fund growth. Each is a different deal with different security, so the first question on any childcare file is which one it is. If you are unsure of the structure, compare a freehold going concern or leasehold purchase first.
| Deal | What you buy or fund | What the lender takes as security | What drives the advance |
|---|---|---|---|
| Leasehold business | The operating business and its goodwill, not the building | Business assets and usually property you already own | Trading record, lease term left, approvals |
| Freehold going concern | The building and the operating business together | The property, valued with the business trading | Trading, approvals and the property together |
| Freehold investment | The building, leased to an operator | The property, valued on the lease | Lease length, rent and the operator's standing |
| New build | A site and a construction project | The site and the centre as it is built | Agreement for lease, catchment demand, your equity |
| Existing operator | A refinance, a second centre or working capital | The property if you own it, otherwise the business | Your own trading history and rating |
| Fitout and equipment | Rooms, playground, kitchen, vans | The goods themselves | Quotes and trading |
General guide only. Lender policies differ.
On a leasehold deal most of what you pay for is purchased goodwill, so the lender has little physical security in the centre itself. Where the building is part of the deal, the loan usually sits with commercial property loans; where you are buying only the operating business, or you already run one and need a refinance, it sits with business loans for operators. Fitout, equipment and vans are financed separately against the goods themselves, and our checklist covers funding fitout, equipment and vans.
How much deposit do you need to buy a childcare centre?
Indicatively, expect to contribute around 40 to 60 per cent of the price on a leasehold business, around 30 to 35 per cent on a freehold going concern, and around 30 to 40 per cent on a leased freehold investment, before duty, transaction costs and working capital. Those are general market ranges, not a quote: the lender's policy, the centre's trading and approvals, the valuation and any extra security all move the figure. The limit is set as a loan-to-value ratio against the security the lender accepts, measured on the lower of the price and the valuation.
| Deal | Indicative advance | Measured against | Deposit this leaves, before costs | What can lift the advance |
|---|---|---|---|---|
| Leasehold business | Around 40 to 60 per cent | An independent business valuation | Around 40 to 60 per cent | Extra property security, a long lease, steady occupancy |
| Freehold going concern | Around 65 to 70 per cent | The property valued with the business trading | Around 30 to 35 per cent | An experienced operator, strong trading, a clean rating |
| Freehold investment | Around 60 to 70 per cent | The property valued on the lease | Around 30 to 40 per cent | A long lease to an established operator; some lenders go higher with extra security |
| New build | Set project by project | Costs and the value on completion | Your equity goes in before the first draw | A signed agreement for lease, a catchment study |
Indicative only and varies by lender. Banks, non-bank lenders and private lenders set different limits for the same centre.
What moves the advance on a childcare centre:
- The deal type. Business only, building only, or both.
- Lease term left. On a leasehold business, how long the lease has to run.
- Trading record and occupancy trend. How many licensed places are filled, and which way that is moving.
- The rating and approvals. The centre's quality rating and any conditions on its approvals.
- The fallback value. What the property is worth if the operator leaves.
- The lender tier. Bank, non-bank or private.
The lender tier is where a broker changes the outcome most: the same centre can get a different advance, and a different deposit, at a bank, a non-bank and a private lender. For why a childcare building attracts a lower limit than a standard shop or office, see why lenders lend less on purpose-built property. The general rules on commercial property deposits still apply, and how non-bank policy differs often decides where a childcare file lands.
How does a lender assess an operating childcare centre?
A lender reads the centre's licensed places and how many are filled, the trend in occupancy, its quality rating and compliance record, the wage bill against revenue, and how dependent income is on the Child Care Subsidy (CCS). Those are common first-pass credit questions because they show whether the earnings, approvals and management can survive after the seller leaves.
Wages get the closest read because they are most of the cost base. The ACCC found that labour is 69 per cent of total costs for centre based day care services, and that land and related costs are the next significant driver of costs (ACCC, Childcare inquiry final report, December 2023). That is a sector average, not any one centre, and it predates the 15 per cent wage increase.
The quality rating is the second lens. Services are rated across 7 quality areas, from Significant Improvement Required up to Excellent (Starting Blocks, Service quality ratings, last updated 14 September 2026). Regulators generally assess and rate a newly approved service within 9 to 18 months of it starting to operate, so a new centre has no rating at completion. The Department of Education considers quality and safety, including past ratings and serious incidents, for new and ongoing CCS approval (Department of Education, Check your eligibility to administer CCS, current page). That test applies to the provider, not only the centre.
What strengthens the file
- Occupancy steady or rising over 2 years
- A Meeting or Exceeding rating with no conditions
- Wages in line with revenue
- A long lease with options
- An experienced approved provider and nominated supervisor
- Clean accounts that match the tax returns
What weakens the file
- Falling occupancy
- A Working Towards rating or conditions on approval
- Wages rising faster than fees
- A short lease left
- New competing centres nearby
- A buyer with no sector experience and no management in place
How does a lender adjust the seller's figures?
A lender rebuilds the seller's profit into the profit you will actually earn, so the number in the information memorandum is rarely the number the loan is sized on. The usual adjustments are:
- Owner labour. An owner who works in the centre unpaid is replaced by a wage you will have to pay.
- Grant-funded wages. Where the centre receives the worker retention payment, part of the wage bill is funded by a grant that runs to 30 June 2028, stops when the service transfers unless you qualify under your own grant agreement, and caps fee increases.
- Rent. A below-market rent to a related landlord is reset to the rent you will pay.
- One-off items. Back pay, subsidy catch-ups or one-off grants are taken out.
The accounts are then tested like any trading business: see which trading figures a lender accepts, how debt service cover is measured, and who funds the goodwill on a childcare purchase.
Can a first-time buyer get finance for a childcare centre?
Yes. A first-time childcare centre owner can still be financed, but the lender and regulator test different things. The lender wants evidence that the buyer can run the business and service the debt; provider approval tests whether the proposed provider and its persons with management or control are fit and proper and capable of managing an education and care service. Direct childcare ownership is helpful but is not the only relevant experience: an educator, centre director or established business owner may strengthen the file when an experienced nominated supervisor and a credible management structure are already in place. If you do not yet hold provider approval, treat that as a separate workstream from the loan and start it early.
How is a childcare centre valued for a loan?
A business is valued on the earnings it can keep producing, a leased freehold on the rent and the lease, and every freehold also gets a fallback value for if the operator leaves; price per licensed place is a market cross-check, not the lender's method.
| Valuation basis | Used for | What it measures | What moves it up | What moves it down |
|---|---|---|---|---|
| Earnings (going concern) | Leasehold business, freehold going concern | Profit the centre can keep producing | Steady occupancy, a strong rating, wages in line with revenue | Falling occupancy, a poor rating, conditions on approval |
| Price per licensed place | Cross-check against recent sales | What buyers paid per approved place | Places that are filled and staffed | Places approved but empty or unstaffed |
| Capitalised rent | Freehold investment | The rent the operator pays and how secure it is | Long lease, strong operator, rent at market | Short lease left, weak operator, rent above market |
| Vacant possession or other use | Every freehold, as the lender's fallback | What the building is worth if the operator leaves | A building that is easy to re-let or reuse | A layout with few other uses |
The valuer's report, not this table, sets the figure for your loan, and the loan is sized on the lower of that figure and your price.
For a leased centre, the capitalised rent is read against market yields. CBRE puts passing initial yields on childcare centres generally between 4.00 and 6.00 per cent, with the difference driven by location, the lease covenant and alternative use prospects (CBRE, Child Care Centres report, read 24 Sep 2026). A lower yield means a higher price for the same rent, so a small change in the yield the valuer adopts moves the value, and your deposit, more than most buyers expect.
The general method is covered in how a going concern valuation works. For the purpose-built angle, see how specialised security is valued.
What do the 2025 and 2026 childcare rule changes mean for your loan?
The Commonwealth can now suspend or cancel a centre's Child Care Subsidy approval over quality and safety, penalties under the National Law have tripled, and the people who run a centre face tougher checks, so lenders now read a centre's compliance record as part of its income.
The biggest shift is the Early Childhood Education and Care (Strengthening Regulation of Early Education) Act 2025 (Act No. 31 of 2025), passed on 31 July 2025 with assent on 2 August 2025. The 2025 Act gives powers to suspend or cancel CCS approval, refuse service applications and impose conditions, including preventing expansion, where quality, safety or compliance requirements are not met (Parliament of Australia, bill r7336; Department of Education provider guidelines, August 2025).
| Change | In force from | What it does | What a lender reads from it |
|---|---|---|---|
| The 2025 Act (Act No. 31 of 2025) | Assent 2 August 2025 | Powers to suspend or cancel CCS approval, refuse service applications and impose conditions, including preventing expansion | Subsidy income depends on the centre's quality and safety record |
| Child safety amendments to the National Law | Penalties from 1 January 2026; most changes from 27 February 2026 | Maximum penalties tripled; new duties and offences; national educator register | Higher compliance cost, and a higher cost of getting it wrong |
| CCS Minister's Rules amendments | 1 July 2026 (most amendments) | Extended provider approval conditions; ASIC, criminal history, working with children, insolvency and identity checks for people with management or control | The buyer's people are tested, not just the centre |
| 3 Day Guarantee | 5 January 2026 | At least 72 hours of subsidised care a fortnight for CCS-eligible families; no guaranteed place | Supports demand; does not guarantee occupancy |
| Worker retention payment | 10 per cent from 2 December 2024; 15 per cent from 1 December 2025; extended to 30 June 2028 | Grant toward wages; services already on it must not raise fees by more than 5.8 per cent between 8 August 2026 and 7 August 2027; from July 2027 services not Meeting Quality Area 2 may have funding cut or suspended | Part of the wage bill is grant funded and conditional, and fee growth is capped |
Sources: Parliament of Australia, bill r7336 (read 24 Sep 2026); Department of Education, announcements of 5 Dec 2025, 1 Jul 2026 and 17 Jun 2026 (worker retention payment extended), and the 3 Day Guarantee page (read 24 Sep 2026).
Notes on the table: the child safety amendments passed in the Victorian Parliament as host jurisdiction of the National Law (Department of Education, Quality and safety timeline). The worker retention payment is an opt-in grant; the Department is still releasing detail on the extended program, so check its current conditions before you rely on it in a purchase.
How are long day care centres rated, and how often are approvals being cancelled?
Most long day care centres are rated Meeting the National Quality Standard, but regulators are now using cancellation far more often: statutory actions recorded as approval cancelled rose from 28 in the June 2025 quarter to 589 in the June 2026 quarter, across all service types.
| Measure | Figure | What a lender reads from it |
|---|---|---|
| Approved services | 18,197, of which 9,705 are long day care | The size of the market a centre competes in |
| Rated services at Meeting NQS or above | 15,805 of 17,131 (92 per cent) | A Meeting rating is the norm, so anything below it stands out |
| Long day care rating mix | 8 per cent Working Towards, 75 per cent Meeting, 16 per cent Exceeding | Where a given centre sits against its peers |
| Actions recorded as approval cancelled | 12 (Q2 2024), 28 (Q2 2025), 589 (Q2 2026) | Regulators now use cancellation, so compliance history is a credit risk |
| All statutory compliance actions | 594 (Q2 2024), 735 (Q2 2025), 1,540 (Q2 2026) | Enforcement has doubled in a year, across all service types |
| Providers running a single service | 78 per cent | Most sellers and buyers are single-centre operators |
Source: ACECQA, NQF Snapshot Q2 2026, published August 2026, read 24 Sep 2026. The snapshot is quarterly, so these figures move. The cancellation count is a national regulatory figure, not a measure of any one centre's risk. Education Ministers have also agreed that services be assessed on average every 3 years, and more often where rated Working Towards (Minister for Education, August 2026), so a lender asks when a centre was last rated as well as what the rating is.
Does the 3 Day Guarantee or the wage subsidy help the loan?
They support demand and wages, but neither guarantees occupancy, and the wage grant is conditional. The 3 Day Guarantee sets a minimum of subsidised hours for eligible families, but no family is guaranteed a place and the subsidy still depends on income and the hourly rate cap. The worker retention payment covers part of the wage increase only while the provider meets its conditions, including the fee cap, so a lender treats that part of the wage bill as grant funded rather than permanent. The same logic, approvals shaping income, runs through how approvals shape aged care lending.
How long does it take to transfer a childcare centre's approvals?
If the buyer still needs provider approval, plan on up to about 120 calendar days before transfer: the regulator has a 60 day decision period for a complete provider approval application, and the service approval transfer needs at least 60 days' joint notice. Some regulators accept the transfer application before provider approval is final but cancel it if provider approval is refused, so the two can overlap only at your risk. Run the CCS application in parallel: the Department of Education publishes no completion timeframe for CCS approval, and it cannot be finalised until National Law approval is granted, so do not write a settlement date that assumes CCS will be finished on a fixed day. The steps below follow the ACECQA Guide to the NQF, section 2.6, ACECQA's provider approval guidance, and the Department of Education's buying a service and CCS approval process guidance (read 24 Sep 2026).
| Step | Official timing | What it means for the buyer |
|---|---|---|
| Provider approval | Decision within 60 calendar days of a complete application | If you are not already an approved provider, start this early. Incomplete information can delay when the decision period starts. |
| Service approval transfer | Normally at least 60 calendar days' joint notice | The service can transfer only to another approved provider and with regulatory consent. |
| Seller's CCS notice | At least 42 days before the intended sale | The seller separately tells the Australian Government that the service is being sold. |
| Buyer's CCS approval | No published completion timeframe | Apply as many weeks as possible before purchase and at the same time as the National Law transfer process. |
| Families | At least 7 days before the service transfer | The receiving provider must notify enrolled families of the transfer. |
| After transfer | Both providers notify within 2 calendar days | The parties confirm that the transfer took effect and the actual transfer date. |
- Set up the buying entity. CCS approval is granted to a legal entity. A trust cannot be approved, but its trustee company can apply. Get structuring advice before signing.
- Apply for provider approval. Time taken to answer the regulator's requests for more information does not count towards its decision period, and an application not decided within that period is taken to be refused. Persons with management or control must be fit and proper, and from 1 July 2026 they face ASIC, criminal history, working with children, insolvency and identity checks for CCS.
- Apply for CCS approval for the service. If you buy a service you must apply for CCS approval for it even though it was already approved, because the provider has changed. Apply as many weeks as possible before purchase and at the same time as the service approval transfer. The seller separately notifies the Department of the intended sale. From April 2025 the application includes a statement of tax record, and CCS cannot be backdated past the date the application is submitted, so lodge it before the date you take over.
- Give joint notice. The selling and buying approved providers jointly notify the regulator within the notice period in the table above. A shorter period is allowed only in exceptional circumstances.
- Wait out the intervention window. The regulator is taken to consent if it has not said it will intervene 28 days before the transfer. It can intervene over your financial capacity, fitness and propriety, management ability and compliance history, and may ask you and your managers to sit an NQF knowledge assessment. If it intervenes, the transfer needs its written consent, it must give its decision at least 10 days before the transfer date, and it can impose conditions.
- Tell families. As the receiving provider, you tell enrolled families before the transfer, within the notice period in the table.
- Settle to the approved date. Settle the purchase to match the approved transfer date. A transfer made without the regulator's consent is void.
What should the sale contract say about the approvals?
The contract should make settlement conditional on the approvals and give a sunset date long enough to get them. Ask your solicitor to cover provider approval, CCS approval, the regulator's consent to transfer, the landlord's consent to assign the lease on a leasehold deal, any replacement bank guarantee or lease security, finance, due diligence and what happens if any approval or handover date slips. Have your solicitor and accountant also confirm whether you are buying assets and goodwill or shares in the operating entity, because the liabilities, tax treatment, employee handover and sale documents can differ. Do not make the CCS condition expire on the assumption that the Department will decide within a fixed number of days, because it publishes no completion timeframe. The regulatory and CCS sequence, not the loan alone, usually sets the earliest safe settlement date. If the property is included, check GST and duty on a going concern with your adviser, and if it is not, see how a loan to buy a business is structured.
What happens after you settle on a childcare centre?
After settlement the finance risk changes from getting the loan approved to keeping payroll, CCS cash flow and the centre's approvals stable under the new owner. Notify the regulator, move enrolments and grant arrangements onto your entity, complete the staff handover and keep enough working capital that a CCS or payroll timing gap does not become a loan problem.
- Notify the regulator. Both providers must notify the regulator in writing within 2 calendar days after the transfer takes effect.
- Get enrolments confirmed. Because the provider has changed, expect to submit enrolment notices under your CCS approval, and CCS is only paid once each family has confirmed its enrolment details (Services Australia). Chase confirmations in the first week, or families see full fees and your subsidy income lags.
- Secure the wage grant. The seller's worker retention payment stops for the service when it transfers. You can receive it for that service only if it meets the conditions of your own grant agreement, including the fee growth cap, so a buyer not already on the program applies for it (Department of Education, worker retention payment reporting obligations). The wage budget you bought assumes it.
- Keep a cash buffer. Do not size working capital as a percentage of the purchase price. Build it from the centre's actual weekly wages, rent and outgoings, supplier payments, loan repayments, CCS timing, tax obligations and any employee entitlement or handover costs. Wages start immediately even if CCS receipts or family confirmations lag. Arrange the buffer before settlement, through cash or a facility such as a revolving business line of credit; the same pattern appears in working capital in the first 90 days after a takeover.
- Complete the staff transfer. If employees continue with the new owner, transfer-of-business rules can require prior service to be recognised for several entitlements, while annual leave, redundancy and long service leave can be treated differently depending on the circumstances. Have your solicitor, accountant or payroll adviser reconcile offers, accrued entitlements and who pays what at settlement. See Fair Work Ombudsman, employee entitlements on a transfer of business.
- Report to your lender. Depending on the facility, the lender may require periodic accounts, occupancy information and notice of material changes to approvals or compliance.
| Measure | Check | Why it matters |
|---|---|---|
| Occupancy | Weekly by room and day, plus starts and withdrawals | Shows whether the enrolment base you bought is holding after the ownership change. |
| CCS and enrolments | Unconfirmed enrolments, CCS receipts and exceptions | Finds subsidy delays before they become a payroll problem. |
| Parent gap fees | Amounts billed, collected and overdue | Separates strong reported revenue from cash that has actually arrived. |
| Wages | Weekly wages and agency costs against revenue and roster assumptions | Wages are the largest cost base and can move quickly if staffing changes after handover. |
| Cash runway | Cash available against the next 4 weeks of payroll, rent, suppliers, tax and debt payments | Shows whether the post-settlement buffer is actually enough. |
| Approvals and staffing | Conditions, incidents, key staff departures and grant status | Flags changes that can affect CCS, compliance, occupancy or lender reporting. |
If you need a facility for working capital or a later refinance once the centre is trading under you, it sits with business loans; a compliance action during the loan is covered in the decline section.
Can you buy a childcare centre property as an investment?
Yes; a lender values a leased centre mainly on the lease and the operator, so the length of lease left, the rent against market and the operator's approvals and rating matter more than the building. You do not need provider approval to own the building; the operator who runs the centre does.
What the lender reads in the operator lease:
- Term left and options. How long the operator is committed, and for how much longer it can stay.
- Rent and review method. What the operator pays and how it moves.
- Outgoings. Who pays them.
- The operator's entity and guarantees. Who signed the lease and who stands behind it.
- The operator's rating and compliance record. Whether its subsidy income is secure.
- Alternative use. What the building could be used for if the operator left.
Lenders price this through how lease length changes the loan, and the facility itself is a commercial property investment loan.
Through a self-managed super fund. Generally possible, because a building used wholly and exclusively in a business is business real property, which a self-managed super fund can own and lease to an operator at market rent, and any borrowing to buy it runs through a limited recourse borrowing arrangement. Whether it suits your fund, and how the borrowing rules apply to you, is a question for an SMSF adviser; see how SMSF property borrowing works for business real property.
How do you finance building a new childcare centre?
Construction lenders want planning approval, an operator signed to an agreement for lease, evidence that the catchment needs another centre, and your own equity in first, before they fund the build.
- Site and planning approval. See funding a site before approval if you are buying ahead of it.
- Agreement for lease with an operator. The operator commits to lease the centre once it is built.
- Independent catchment or needs study. It should cover existing and approved centres. The ACCC found providers' supply decisions are highly influenced by expectations of profitability and viability in a local market (ACCC, Childcare inquiry final report, December 2023). CBRE estimates new supply has run at about 30,000 places a year against underlying demand growth of about 11,000 a year (CBRE Early Education Report, March 2026). Those are national estimates; a catchment study still decides a given site.
- Feasibility with costs and contingency. See what lenders test in a feasibility.
- Your equity in before the first draw.
- Construction facility drawn against progress. Arranged through development finance.
- Refinance once trading. Move to an investment loan once the centre is complete and trading.
A new centre has no quality rating at completion, and regulators generally rate a new service within 9 to 18 months of it opening, so the lender on the end loan reads the operator's record elsewhere until then.
Why do childcare centre loans get declined?
Most declines come from the centre (falling occupancy, a poor rating, a short lease, new competition nearby) or from the buyer (no sector experience, thin deposit, unclear accounts), and many can be fixed or taken to a different kind of lender.
Common reasons for a decline
- Falling occupancy
- A poor rating or conditions on approval
- A short lease left
- New competing centres nearby
- No sector experience in the buying team
- A thin deposit
- Accounts that are unclear or do not match the tax returns
What to do next
- Ask the lender which reason applied
- Fix the evidence gap
- Add management or an experienced nominated supervisor
- Restructure the deal type
- Take it to a non-bank or private lender where the reason is policy rather than risk
What if the centre is under compliance action?
Open or serious compliance action can materially reduce lender appetite because it can affect the centre's income, management risk and whether the transfer proceeds. A cancelled service approval cannot be transferred, but a service approval that is going to be cancelled may still be transferable with the regulator's consent, and the application must be made within 14 days of the decision to cancel (ACECQA Guide to the NQF, section 2.6). Treat any open compliance notice, condition or show cause process as something to resolve, with legal advice, before finance is sought.
What tends to decide a childcare file
As at September 2026, in general lender practice on childcare purchases:
- The approval transfer usually sets the settlement date, so buyers who lodge the provider and subsidy applications early have the most room.
- Lenders give more weight to 2 years of steady occupancy than to 1 strong year.
- On a leasehold centre, a short lease left cuts the loan faster than softer trading does.
- Buyers without sector experience get further when an experienced nominated supervisor or management arrangement is already in the file.
General observations about lender practice, not a quote, an offer or an assessment of your application.
Where a bank has already said no, start with what a business loan decline means. If the reason is policy rather than risk, a non-bank lender may read the centre differently, and short-term private lending can carry a file while the evidence gap is fixed, where there is a clear way out.
What should you check before making an offer or applying for finance?
Before you sign, test the centre as both a business and a regulated service. A lender's checklist is narrower than a buyer's due diligence: you also need to know whether the lease can transfer, which staff and liabilities move with the business, whether the approvals and CCS pathway are clean, what competition is coming into the catchment and how much cash the centre needs immediately after takeover.
| Check | Evidence to obtain | Why it matters to the deal |
|---|---|---|
| Revenue and occupancy | Accounts, tax returns, BAS, year to date trading, occupancy by room and day, enrolments, recent withdrawals, future starts, waitlist detail, fee schedule and CCS income | Tests whether the earnings in the information memorandum survive lender and buyer scrutiny, and whether headline occupancy or a large waitlist is supported by actual enrolment behaviour. |
| Staff and payroll | Roster, pay rates, employment terms, leave balances, use of agency staff and worker retention payment status | Wages are the largest cost base and employee entitlements can affect the settlement adjustment and post-settlement cash need. |
| Approvals and compliance | Provider and service approvals, rating, conditions, compliance history, serious incidents and status of buyer applications | Approval problems can affect CCS income, service transfer and lender appetite. |
| Lease or property | Lease, options, rent reviews, make good, landlord consent, title and valuation material | A short or non-transferable lease can reduce the business value and the loan even if trading is strong. |
| Competition and catchment | Existing centres, approved new supply, local occupancy, population and development pipeline | Today's occupancy may not survive new supply nearby, which affects both valuation and debt service. |
| Assets and liabilities | Equipment list, maintenance, finance interests, supplier contracts, refunds, deposits and any PPSR registrations | Confirms what you are actually buying and which debts or obligations must be cleared or adjusted at settlement. |
| Contract and settlement | Finance, due diligence, approval and lease conditions; sunset dates; settlement adjustments; restraint and handover terms | Prevents the contract date from outrunning the regulatory, lender or landlord timetable. |
Australian Government guidance on buying an existing business recommends checking financial records, operations, legal documents, licences and permits, contracts and leases, assets and liabilities before committing. For childcare, add the sector-specific approval, staffing, CCS and compliance checks above. See business.gov.au, Buy an existing business.
What documents will the lender want for a childcare centre loan?
Once the deal survives due diligence, turn the same evidence into a lender-ready pack rather than making the lender reconstruct the transaction from emails.
- Accounts. 2 to 3 years of accounts and tax returns, plus year to date.
- Occupancy. Monthly occupancy plus room-and-day reports, enrolment starts and withdrawals, and enough waitlist detail to show whether stated demand is converting into actual enrolments.
- Subsidy income. CCS income statements and details of any material grant income.
- Staffing. Wages report, staffing roster against ratios, key management and whether the centre receives the worker retention payment.
- Fees. Current fee schedule and fee increases over the last 2 years.
- Approvals. Provider approval, service approval, current rating and any conditions or compliance history.
- Lease. Lease, options, rent reviews and landlord consent pathway.
- Sale documents. Contract of sale, information memorandum and the final asset or share purchase structure.
- Your entity. Entity details, experience, management plan, persons with management or control and status of provider and CCS applications.
- Deposit and liquidity. Evidence of the deposit plus the cash or facility that remains available after settlement.
- Position and guarantors. Asset and liability statement and guarantor details.
Expect questions about director's guarantees and whether a general security agreement will sit over the business assets. If you are still deciding what entity will buy the centre, resolve that before the approval applications: CCS approval is granted to a legal entity, and a trust itself cannot be approved although its trustee can apply.
A childcare purchase is not just a loan application. Start with the deal type, then test the centre before you sign: trading, occupancy, staffing, approvals, lease, compliance, competition and the cash cycle after takeover. The lender sizes the debt from the accepted valuation and security, while the regulator and CCS process can control when the operating business can safely change hands. Keep liquidity after the deposit because wages and operating costs start immediately, while enrolment, subsidy, grant and staff handover issues can all move cash around the first weeks.
Key takeaway: finance the whole handover, not just the purchase price.Frequently Asked Questions
A childcare business loan is a commercial loan to buy, build or refinance a childcare centre or the property it runs from. The deal type decides the lender's approach, because a leasehold business, a freehold going concern, a leased investment and a new build are each secured and valued differently. Our childcare centre finance checklist sets out what each deal needs.
If the buyer still needs provider approval, allow up to about 120 calendar days for the National Law sequence: a complete provider approval application has a 60 day decision period and the service approval transfer then needs at least 60 days' joint notice. Run CCS in parallel because the Department does not publish a completion timeframe for CCS approval, and ask your solicitor to build those dates and the going concern terms into the contract.
Yes, and you should apply before the date you take over, because Child Care Subsidy cannot be backdated past the date the application is submitted. It is assessed alongside the National Law transfer but cannot be finalised until National Law approval is granted, and the Department publishes no completion timeframe, so hold working capital for the handover in case subsidy income lags.
You can buy the building without provider approval, because only the operator of the centre needs it, but you cannot take over running the centre without it. A buyer of the operating business must hold provider approval before the service approval can transfer, while a freehold investor leases to an approved operator instead; see how lease length changes the loan.
Price per licensed place is the sale price of a childcare centre divided by its approved places. It is a market cross-check only, because it ignores whether those places are filled or staffed. Lenders value a centre on its earnings or, for a leased freehold, on the rent and the lease, through a going concern valuation or a property valuation.
Yes, the buyer of a childcare centre needs its own Child Care Subsidy approval. Approval is granted to a legal entity, and a trust cannot be approved, although its trustee company can apply. Get structuring advice before signing, and see how financing a business purchase fits around the entity you choose.
Families keep their Child Care Subsidy eligibility when a centre changes owner, but the subsidy is only paid through a provider with CCS approval for that service, and only against enrolments the family has confirmed. Expect a gap in the first weeks while enrolments are confirmed under the new owner, and hold working capital, such as a business line of credit for the handover, to cover it.
No, the worker retention payment does not transfer with a childcare centre. The seller stops receiving it for the service at transfer, and the buyer can receive it only if the service meets the conditions of the buyer's own grant agreement, including the fee growth cap. Price the purchase on that basis, and see who funds the goodwill when earnings lean on a grant.
Yes, a childcare centre's quality rating affects the loan, because lenders read it as evidence of compliance risk. Services are rated from Significant Improvement Required up to Excellent, and the Department of Education considers quality and safety, including past ratings, for Child Care Subsidy approval. A rating below Meeting, or conditions on approval, is a common reason behind a declined business loan.
Generally yes. A building used wholly and exclusively in a business is business real property, which a self-managed super fund can own and lease to an operator at market rent, with any borrowing through a limited recourse borrowing arrangement. Whether it suits your fund is a question for an SMSF adviser; see SMSF borrowing for business real property.
An agreement for lease on a new childcare centre is an operator's commitment to lease the centre once it is built. Construction lenders want it signed before they fund the build, alongside planning approval, a catchment study, a development feasibility and your equity.
From a lender's view only, and not as investment advice: lenders like the steady demand for childcare centres but price in the wage bill, regulation and local supply. Labour is most of a centre's cost, fee growth is capped for centres on the wage grant, and new centres follow expected profitability, so supply can catch up with demand in a catchment. See how lenders price purpose-built property.
Yes. Childcare fitout and equipment can be financed, but the structure depends on what is being funded and the available security. Equipment may sit in asset finance where the goods support the facility, while broader fitout or refurbishment can sit inside a business or property facility with the right lender. See how fitout finance works.
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