Nursery business finance for day nurseries and pre-schools

In England you must register as a childminder if the children are under 8, you look after them for more than 2 hours a day and you are paid, including payment in kind. GOV.UK's guide to becoming a childminder explains that you register with Ofsted or a childminder agency, and that you can be based at home or at other premises. Because your income depends on that registration, lenders usually want it in place before they lend, and lenders usually assess a childminder still waiting to register as a start-up.

• Small term loans. Sole trader loans for a garden room, play area or a refit of the space children use.
• Start-up funding. Start-up business loans for someone moving into childminding with no trading record yet.
• Vehicles and equipment. Asset finance for a larger car or people carrier used for school runs.

Borrowing secured on the family home falls under different rules and needs a mortgage adviser rather than a commercial finance broker.

Illustration only. A childminder who has traded for three years wants £15,000 for a garden room so she can take on an assistant and more children. She brings two years of tax returns, six months of bank statements, her registration details and her waiting list. Lenders usually size the loan on the profit she has already declared, not on the places she hopes to fill, so the waiting list supports the case rather than replacing the figures. If the plan is a move into separate premises, our guide on how to open a nursery covers what changes. Instant Quotes shows which lenders on our panel may suit, with no credit search.

Ofsted publishes inspection reports for nurseries and childminders in England through its find an inspection report service, so a lender will read yours as a parent would. Expect questions on each action raised, who is responsible and the deadline, whether the money you want pays for those actions, and how many children have joined or left since. A setting that can show actions closed and enrolments holding up is a very different risk from one still waiting to start.

Premises and safety works can be funded with an unsecured business loan or refurbishment finance, and training or extra staffing through a working capital loan. Directors are usually asked for a personal guarantee. Borrowing to cover a loss that will not go away once the actions are closed tends to make things worse, so test the repayment against the setting after the fix, not before.

It depends on why occupancy is low and what the money is for. Illustration only. A 60 place setting is 65% full after a group of children leave for reception class. The owner shows that costs are covered at 60%, that baby room enquiries have risen since funded hours widened, and that the money is for a second baby room with a waiting list. That is a growth case many lenders will consider. The same nursery borrowing to pay wages because it sits below break-even is a rescue case, and far fewer will. If you are weighing up buying a struggling setting, see buying or expanding a nursery group, and use Instant Quotes to see which lenders on our panel may suit, with no credit search.

An unsecured business loan suits new rooms, outdoor areas and refurbishment where there is no single asset to secure. Directors usually give personal guarantees. For larger schemes, lenders may take a debenture over the company. Where building work is substantial, fit-out and refurbishment finance can stage drawdowns against the works.

Nurseries that own their building, or want to, can borrow against it. Secured business loans support larger sums over longer terms, and our guide to buying business premises covers purchasing the freehold of an owner-occupied setting. Lenders value a nursery building partly as a going concern, so trading performance matters even in a property-led application.

Working capital loans or a revolving facility can cover timing gaps: a council payment reconciled late, the summer occupancy dip, or wages at a new site before it fills. They should fund timing, not a funding rate that sits permanently below cost.

Minibuses for school collections, commercial kitchen equipment, and IT for learning journals and parent apps can be financed over their working lives. Play equipment and furniture are soft assets with little resale value, so lenders often include them within a wider loan instead.

Some lenders offer loans under the British Business Bank's Growth Guarantee Scheme, where the government guarantee to the lender can help a nursery that is short of security. The guarantee protects the lender, not the nursery: you owe the full amount either way.