Quick answer
Childcare centres usually fund growth with a mix of property finance for the building, equipment or fit-out finance for the interior, and working capital to carry the months before occupancy builds. Child Care Subsidy is paid to the provider to reduce fees, so occupancy and staffing ratios, not demand alone, decide how fast a new centre can repay what it borrowed.
Key points
- A new centre spends heavily before it earns: fit-out, approvals, ratio-driven wages and marketing all start ahead of full occupancy
- Since 5 January 2026 the 3 Day Guarantee gives eligible families at least 72 subsidised hours a fortnight, though it does not guarantee a place
- Property, fit-out and working capital are three different funding jobs and rarely suit one loan
- Lenders focus on occupancy, staff ratios, quality ratings and the experience of the operator
- Size the facility on a slow ramp-up, not the brochure projection
A childcare centre is part property play, part labour-hire business and part community institution. That is exactly why growth money is awkward to arrange. The building wants one kind of finance, the fit-out another and the first twelve months of wages a third.
This guide walks through how operators actually put those pieces together, and how the way subsidy flows shapes what a lender will be comfortable with.
How does money move through a centre?
Parents pay a fee. The Child Care Subsidy is paid by the government to the approved provider, which lowers what the family has to pay, so the provider’s revenue is the sum of subsidy and gap fees across booked hours. Services Australia describes it as being sent to the provider to reduce family fees.
On the other side, wages are driven by regulated educator-to-child ratios. If you have 40 children across age groups, you need a certain headcount of staff whether the rooms are 60 per cent full or 95 per cent full. That makes occupancy the number that matters most. Rent or mortgage, wages and insurance are largely fixed; only the income moves.
From 5 January 2026 the 3 Day Guarantee has applied: eligible families are entitled to at least 72 hours of subsidised care a fortnight for each child, regardless of the old activity test. It happens automatically in the CCS system. It does not guarantee a place with you, and families may still face a gap fee. For a provider, the effect is potentially steadier demand for sessions, but you still have to win the enrolment and staff the room.
What does growth actually involve?
There are four common routes, each with a different cash pattern.
- Buying an existing centre. You pay for goodwill, equipment and sometimes the building, but income starts at once. Due diligence matters: occupancy trend, staff retention, quality ratings and lease terms. See due diligence before buying a business.
- Building or converting a site. The longest road, with design, approvals, construction and fit-out before a single child is enrolled.
- Leasing and fitting out. Lower upfront cost than buying the property, but the fit-out is yours to fund and the lease length sets your risk.
- Adding a second centre. Pulls the owner’s time and cash away from the first one. Our guide on funding a second location covers this specifically.
Each approach needs the right approvals before you can operate. Provider and service approvals sit with state and territory regulators under the national framework, and the timing of those approvals can move your opening date, and therefore your funding need.
Which parts need which finance?
| Job | Usual finance | What lenders look at |
|---|---|---|
| Land and building | Commercial property loan | Valuation, loan-to-value, rent or trading income |
| Buying a centre | Business acquisition loan | Occupancy, financials, operator experience |
| Interior fit-out | Fit-out or secured term finance | Quotes, lease length, overall serviceability |
| Furniture and equipment | Equipment finance | Asset value and term |
| Ramp-up wages and set-up costs | Working capital loan or line of credit | Cash flow forecast and other security |
The most common structural mistake is asking one loan to do all four jobs and finding the term and security are wrong for most of them. The second is leaving working capital out entirely because the build budget absorbed everything. See also how to fund a fit-out and commercial property loans for first-timers.
What is the ramp-up gap?
The ramp-up gap is the period when your costs are close to full but your enrolments are not. A new centre may open with a handful of children and add more over months. During that time you pay ratio-driven wages, rent, insurance and marketing against a partial income.
Treat this as a planned cost with its own funding, not an unlucky surprise. Build the forecast three ways: expected, slow and very slow. Then ask how much cash the very slow case consumes before break-even, and make sure the facility, reserves or other property equity can carry it. Lenders will do this sum anyway, and an application that shows it already has done it reads more credibly. Our guide to building a cash flow forecast for a loan shows the layout.
What are the hidden costs of a new centre?
Operators are usually precise about the build and vague about everything that follows. Allow for these before settling the number you borrow:
- Outdoor play areas and shade. Often a surprisingly large line, and subject to the regulator’s standards for the site.
- Pre-opening staff. Directors and room leaders are typically needed before the first child arrives, to write policies, set up rooms and complete training.
- Marketing and open days. Enrolments rarely arrive by themselves, so a launch budget sits alongside the ramp-up reserve.
- Software and compliance systems. Enrolment, billing and CCS management tools have set-up and subscription costs.
- Contingency. Construction and approvals regularly run longer than planned, and every extra month is another month of rent or interest with no income.
A useful discipline is to hold a contingency of at least ten per cent of the project cost, separate from the ramp-up reserve, and to ask your lender up front whether the facility can be drawn in stages as the build progresses.
What do lenders want to see?
- the operator’s experience, especially any current or past centres
- occupancy history for an existing centre, or a catchment case for a new one
- quality ratings and compliance record
- staffing arrangements and retention
- financial statements and recent bank statements
- the property or equity on offer as security
For a first-time operator, a lender may weigh the director’s background in education or centre management heavily. For an existing operator, performance of the current centre becomes the best evidence you have. Banks can be strong in this sector and are worth approaching first, since many are comfortable with childcare property when the numbers hold. If a bank declines or cannot move fast enough, an alternative lender can assess the project on equity and cash flow instead.
How does an existing centre help a second one?
The strongest security story in this sector is a profitable first centre. Its trading history shows occupancy, wage control and quality rating over time, which is what a lender cannot see in a brand-new site. Operators often fund the second site partly from the first centre’s surplus cash and partly from equity in the first centre’s property, if they own it.
The flip side is the strain it places on the original business. A lender will ask who runs centre one while you set up centre two, and whether the first centre can lose a little profit without missing repayments. Showing a capable director in place at the first site, and a forecast in which centre one carries the group through a slow second ramp-up, answers both questions.
A worked example
Illustrative only. An operator with one profitable 60-place centre in Adelaide’s north wants to open a second 70-place site on leased premises.
- Fit-out and equipment: $620k
- Pre-opening wages, marketing and licensing costs: $90k
- Ramp-up reserve to cover an estimated 14 months of partial occupancy: $260k
Total need: about $970k. The landlord contributes a $150k incentive, and the operator brings $120k cash. The remaining roughly $700k is split into a secured fit-out loan of $450k, equipment finance of $90k and a $160k working capital line. The existing centre’s profits and the owner’s home equity support the security.
The point is not the figures, which are invented, but the shape: three tools, each matched to its job, and a ramp-up reserve sized on the slow case.
What next?
If you are weighing a purchase or a second site, the first useful step is working out which parts of the project need which kind of money and how much patience the ramp-up will require. We talk this through with operators who are early in planning as readily as those with a contract to sign.
Our enquiry takes around a minute and does not involve a credit check. Your details are not scattered among lenders; a real person reads them and calls to discuss. Give us honest numbers on occupancy, the site and what you can contribute, and we can point to the most suitable route first time.
Frequently asked questions
How do childcare centres get paid?
Families pay a fee, and the Child Care Subsidy is paid by the government to the approved provider to reduce the fee the family pays. The provider's income is therefore a combination of subsidy and gap fees, driven by the number of booked and attended hours.
What did the 3 Day Guarantee change for providers?
From 5 January 2026 it replaced the activity test for the base subsidy, so every eligible family can access at least 72 hours of subsidised care per fortnight for each child. It applies automatically through the CCS system, but families still have to secure a place and may pay a gap fee.
How much does it cost to open a childcare centre?
It varies enormously with size, location, whether you buy or lease and the standard of the fit-out, so be wary of any single number. Break it into land and building, fit-out, equipment, approvals, set-up wages and working capital, then get quotes for each.
Can I borrow to buy an existing childcare centre?
Yes, a business acquisition loan can cover the purchase, often alongside property finance if the building is included. Lenders will want to see the centre's occupancy history, staffing, quality rating and financial statements.
Will lenders fund a brand-new centre?
Some will, but they usually look harder at the operator's experience, the demand in the catchment and how the ramp-up is funded. Equity in other property can make the difference where the new site has no trading history.
What if my bank declined the expansion?
A bank is often the cheapest funder and worth taking seriously if it offers. When one declines, because the site is new, the timing is tight or the security does not stack up, non-bank lenders can look at the project differently.