Financing a Third Daycare Location with One Commercial Financing Package After the Bank Offered a $2,000 Card Increase

The Situation

The business had banked with the same major bank since it was founded eight years earlier. It opened its first centre with more than a few dozen licensed spaces and a second a few years later with a few dozen more. Both were full, with roughly 130 enquiries in three months and no space to offer. The third centre, the largest, had its lease signed and a build-out to fund.

The Challenge

The credit had never grown with the business. The corporate card sat at $5,000 and the operating line under $10,000, near 10%, both set years earlier for a much smaller company. When the third centre was planned, the bank's answer was a $2,000 increase on the card. By then the owner was running day-to-day purchases through personal credit cards at over 20%, the term debt was spread across several lenders with three separate security positions and a cross-default clause, and the new location needed leasehold improvements and equipment funded before it could enrol a child.

The Solution

We read the financials first and wrote the file the way a lender needs to read it: three years of statements tied to the tax returns, bank statements reconciled line by line, revenue that is mostly provincial childcare funding, and the two existing centres already covering the entire proposed debt almost twice over before the third centre opened. We took that submission to several lenders, including the commercial lending team at the client's own bank, a prime lender. A branch can only offer what the branch has; the commercial desk, with the right program, could do far more. One package: the operating line, the business credit cards, a leasehold-improvement facility advanced in draws against invoices, and one term loan consolidating every other lender.

The Outcome

Several approvals came back, and the client chose to stay with their own bank. The signed agreement provides business credit cards of about $75,000, against the $7,000 the bank had offered. An operating line of roughly $200,000 at about one point over prime, roughly four points below the old line. A leasehold-improvement facility of roughly $500,000, covering the build-out and most of the equipment, drawn as the work is invoiced and then termed out over seven years. And a term loan of roughly $325,000 that consolidates the other lenders' loans into one, over five years. About $1.1 million in all, with one lender and one security position in place of several. Eight years of clean banking earned a $2,000 card increase at the branch. The same bank's commercial team, handed a complete file, raised the card by about $70,000 and the line by roughly $200,000, and cut the rate on that line by about four points. That is why you work with a broker.

One more thing came back the other way. The client had found us through a mutual friend of a financial advisor we work with, without that advisor ever knowing. With the client's consent we introduced the two, who had never met, and with the financing cleaned up they are now working together on the investment and planning side.