How a Childcare Business Loan Can Help You Meet Licensing Requirements

Childcare is the top priority of millions of working parents, which has driven the childcare industry to more than $71.7 billion in 2025. Entrepreneurs who love kids may find starting a daycare is a lucrative venture, but it’s also an expensive one. Childcare licensing requirements make starting and operating a daycare a constant compliance battle.

Your childcare centers and childcare programs must meet certain safety and accessibility standards, and sometimes upgrades are necessary. Whether you’re getting your daycare license and need to meet licensing standards for daycare centers or you’re ready to expand an existing daycare, a small business loan can help you cover costs to meet and remain compliant with childcare licensing requirements and other operating costs.

In this article:

• Common requirements to open a daycare and how to meet them
• How financing can help you meet childcare licensing requirements
• How to get approved for a childcare small business loan

Common childcare licensing requirements

If you haven’t already become a licensed childcare provider, it’s imperative to understand your state’s requirements. Each state has different regulations, but typically, to get a daycare license you must:

• Contact your state’s childcare licensing agency to understand all necessary training requirements.
• Pass a background check.
• Meet all health and safety requirements, including any necessary certifications like First Aid or CPR.
• Submit an application to the state authority with detailed plans for your program.
• Pass an on-site inspection of your daycare to ensure health and safety standards.

It’s your responsibility to learn the childcare licensing requirements for your state and the steps to apply for a daycare license. This is a general overview, but the specific steps in every state will vary. Whether you provide early childhood education, general childcare services, family child care homes, or after-school programs for school-age children, you’ll have to meet specific regulations to verify you support child development and well-being.

Most states will continue to inspect your childcare center and caregivers’ licensure periodically, so it’s imperative to ensure you remain compliant with all childcare regulations.

How you can use small business financing

Small businesses use loans and other funding for various purposes, from acquiring inventory to expanding into new markets. Childcare businesses can use funding to meet more general business needs, or specific ones related to childcare licensing requirements.

Some of the most common ways childcare providers can use financing include:

• Facility upgrades: States update health and safety standards occasionally, and it’s your responsibility to make sure your licensed childcare center meets state regulations. This may require making accessibility updates for children with disabilities, performing regular fire inspections, and improving childproofing throughout the building.
• Equipment: You don’t want any children getting hurt on your watch, so it’s crucial to always have the best safety equipment on hand and to upgrade play structures and toys that have become dangerous through wear and tear.
• Staff training: Accredited childcare providers must have licensed caregivers, and this training costs money. Great providers will cover the costs of staff training or licensure renewal to invest in their professional development and continue to attract top talent.
• Compliance fees: The licensing process may include licensing fees, registration fees, and supply fees. Depending on the state and type of childcare, you may have to pay compliance fees annually, which can dent your working capital. (Not to mention, you’ll need significant liability insurance.) Financing can help ease the impact.
• Service improvements: Offering early childhood education, providing technical assistance to customers, or starting a family services hotline are all ways you can better serve the community. Small business funding can support these missions.
• Expansion: When you’re ready to open a new center, small business financing can help with everything from acquiring and renovating a building to license application fees.

Types of financing options for childcare businesses

There are many funding options for small business owners, depending on factors like your creditworthiness, time in business, and annual revenue. You can get funding whether you’re a for-profit or nonprofit and may have access to loan products from both traditional lenders and online lenders. Below, we break down some of the most common funding options.

Term loans

When you think of a loan, you probably think of a term loan. These conventional loans provide you with upfront funding in exchange for a monthly payment plus interest. Term loans may be both short-term or long-term and are generally flexible, allowing you to use the money to address immediate business needs as well as broader business goals. They can be a great resource to help you meet childcare licensing requirements, expand childcare facilities, and more.

SBA loans

The United States Small Business Administration (SBA) offers several popular loan programs for small businesses. The SBA works with approved lenders to partially guarantee loan amounts, reducing the risk of default to both the borrower and the lender.

These loans tend to have strict eligibility requirements, but qualified applicants may get some of the most competitive interest rates and best loan terms on the market. Generally speaking, SBA loans are not available to nonprofits, but they can be excellent funding resources for childcare licensing requirements as you can use loan proceeds for any approved business purpose.

Business lines of credit

Many small business owners use business lines of credit to cover business expenses. This flexible financial instrument works like a cross between a loan and a business credit card. Once approved, you’ll have access to a maximum loan amount that you can withdraw upon when you need capital. However, rather than pay interest on the full loan, you only pay interest on what you use, giving you greater control over interest payments and fees.

Lines of credit can be a great safety net if you need to make fast upgrades to meet childcare licensing requirements.

Merchant cash advances

Merchant cash advances (MCAs) are not technically a loan. They’re more like a partnership — a commercial agreement between two businesses. An MCA provider gives your business a cash advance, and you must repay a larger amount determined by a factor rate.

MCAs tend to fund very quickly, but you typically must repay them with daily or weekly percentages of your revenue. While that’s useful when business is slow, frequent payments can negatively impact revenue when business is good.

If the Department of Health tells you to make urgent upgrades to meet childcare licensing requirements, an MCA could be your fastest funding option, but you should always do your research and thoroughly review any agreement before signing anything.

How to get a childcare business loan

Getting a loan for a childcare business is similar to getting one in another line of business, except that you’ll need to provide some additional documentation to prove your accreditation. (Unless you’re license-exempt, which is very rare.)

Generally, the process looks like this:

1. Determine funding needs: At the outset, you must figure out how much money you need and how quickly you need it. This will inform the type of loan you pursue and help you figure out how much you can afford to repay in a monthly payment. If you urgently need to meet childcare licensing requirements, it’s probably better to work with an online lender that can provide faster funding than a traditional one.

2. Compare lenders: When you know what you need and can afford, you must shop and compare lenders to find the best loan products and terms for your business. Most lenders offer pre-approval programs so you can check your eligibility based on your credit score, annual revenue, and time in business.

3. Gather documentation: Every lender has different application requirements, but you’ll usually need to provide business and contact information, licensing information, a thoughtful business plan for how you’ll use the money, financial statements, and tax returns.

4. Apply: Many lenders allow you to apply and get approved online, but you may have to complete an application over the phone or in person. Depending on the lender and loan product, the application process may take anywhere from a few business days to a few months.

Final thoughts

Meeting childcare licensing requirements is imperative for any childcare service provider. Whether you’re a home provider or a growing daycare center, you must have the proper licensure and meet compliance regulations to stay open. That can be a constant, expensive challenge as things break down and regulations change over time.

With small business financing, you can get the funding you need to remain compliant with licensing standards for daycare centers and improve your business.

FAQs about childcare licensing requirements

What are childcare licensing requirements?

Every state has requirements for childcare providers and caregivers. These licensing requirements help prevent child abuse and ensure that children are cared for in a safe, professional environment by qualified individuals.

How does small business financing help you meet licensing requirements?

There are many ways your childcare business can fail to meet licensing requirements, including dated facilities, unsafe equipment, unlicensed staff, failure to pay compliance fees, and more. Financing can give you the capital you need to make improvements and address issues so you can stay in business.

What are the requirements to open a daycare?

They vary from state to state, but typically you’ll have to first apply for a daycare license by passing state-mandated training, a background check, and mental health screenings. From there, you’ll need to submit a detailed proposal to the state for your daycare, set up a facility, and demonstrate that you meet all licensing standards for daycare centers.

What are some of the financing options for daycares?

Some of the funding options include term loans, SBA loans, business lines of credit, business credit cards, and merchant cash advances (MCAs).

How do you get a business loan?

To get a small business loan, you must first determine what you can qualify for and how much money you need. When you have a firm idea of how you’ll use the money and what you can afford to pay back, you should research lenders to compare interest rates and loan terms. When you’re ready to apply, gather your business and license information, business plan, financial statements, and tax returns, and apply.

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