Where to Get a Loan
Where to Get a Loan
Borrowing money is an accepted practice in America for just about anything whether it's to buy a house, a car, furniture, or just to pay the next month's bills. As a general rule I strongly recommend that providers only borrow money for items that appreciate in value. Such items are limited to a home, improvements on a home, and a college education.
Where should you look for a loan? Here are some possible resources:
In some states there are loan programs specifically aimed at family child care providers. Many such programs are part of the National Children's Facilities Network (www.ncfn.org/ff.htm).
Contact your local bank or credit union.
Your local child care resource and referral agency will be able to give you information about public and private grants or loans that might be available.
If you have a permanent life insurance policy (also know as whole, universal, variable, or cash-value insurance) you may be able to borrow against it at a very low interest rate. Your policy may also allow you to pay back only interest. Doing so will reduce your life insurance benefits if you die before paying back the principle.
Contact a women's business center in your area. Some centers offer loans to providers. To find a center in your area, visit www.sba.gov/aboutsba/sbaprograms/onlinewbc/index.html.
There are micro enterprise loan programs that assist small businesses such as family child care providers. For more information, visit www.microenterpriseworks.org.
The Child Care Bureau has posted a directory of 85 organizations that offer small loans to child care programs: nccic.acf.hhs.gov/poptopics/micro-directory.html
The U.S. government Small Business Administration (SBA) sponsors the Office of Small Business Development Centers (SBDC) that may be able to give you help with your need for a loan by referring you to local resources: www.sba.gov/aboutsba/sbaprograms/sbdc/index.htm
Ask for help from your family or friends. If you do so, put your loan agreement in writing with a specific plan for repayment (when will the repayments begin, how much will be paid each month, and how much interest, if any, will be due).
We strongly recommend that you do not use your credit card as a source of a loan. Credit card interest (which can exceed 20%) is much higher than any of the loan options identified above. Credit cards should only be used for purchases you can pay off at the end of each month.
Tax note: Any interest you pay on a loan that involves a business purpose is tax deductible. If the loan is for something that is used only in your business (children's furniture, remodeling the basement used exclusively by your day care children, or a swing set when your children are grown), then you can deduct 100% of the loan interest. If you use the item purchased for both your family and your business (new windows, remodeling the kitchen, etc.), then only a portion of the loan is deductible. Use your Time-Space Percentage to determine the business portion.
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This handout was produced by Resources for Child Caring (www.resourcesforchildcare.org).
For additional family child care business publications, contact Resources for Child Caring’s publishing division, Redleaf Press, at 800-423-8309 or visit www.redleafpress.org.
