SBA lenders approved 149 7(a) loans to child and youth services businesses from October 2023 through June 2026, $85,900,900 from 72 lenders. The median loan was $175,000 against a national $150,300, at a median rate of 10.25%, level with the national median. Only for-profit operators qualify. The industry leans heavily on SBA 504, with 79 projects at a median of $553,000, and acquisitions are rare at 6.7% of loans. Lenders decide on the stability of government and private-pay revenue, the license, and whether cash flow covers the payment.
| Measure | Child and Youth Services | All industries |
|---|---|---|
| SBA 7(a) loans approved | 149 | 162,355 |
| Median loan | $175,000 | $150,300 |
| Middle half of loans | $50,000 – $500,000 | $50,000 – $500,000 |
| Loans of $1 million or more | 14.8% | 12.9% |
| Median rate at approval | 10.25% | 10.25% |
| Middle half of rates | 9% – 11.25% | 9.3% – 11.25% |
| Acquisitions (change of ownership) | 10 (6.7%) | 16,849 (10.4%) |
| Median acquisition loan | $969,000 | $693,000 |
| Lenders that made these loans | 72 | 1,648 |
| SBA 504 loans (real estate, equipment) | 79 | 16,714 |
Approvals FY2024 – FY2026 to date (1 Oct 2023 – 30 Jun 2026), cancelled loans excluded. Source: SBA 7(a) and 504 FOIA loan records, as of June 30, 2026.
- SBA 7(a) loans approved
- 149 (Oct 2023 – Jun 2026)
- Lenders that approved one
- 72
- Median loan
- $175,000 (national $150,300)
- Median rate at approval
- 10.25% (national 10.25%)
- Acquisitions
- 6.7% of loans (national 10.4%)
- SBA 504 projects
- 79, median $553,000
Who is in this industry, and who SBA will lend to
Child and youth services (NAICS 624110) covers social services for children and young people: foster care placement and adoption agencies, youth centers, mentoring and guidance programs, and a range of after-school and youth development programs. It is a different code from child care centers and preschools, which have their own page: SBA loans for child care services.
Much of this field is run by nonprofits, and SBA 7(a) and 504 loans go only to for-profit businesses. The borrowers in these figures are for-profit operators: private foster care and placement agencies that contract with states and counties, franchised and independent youth programs, and owners of the facilities those programs run in. If your organization is a nonprofit, the SBA route is closed, and the conversation is about conventional bank or community lending instead.
The approvals, read against the national figures
| Figure | Child and youth services | National |
|---|---|---|
| Loans / total approved | 149 / $85,900,900 | |
| Median loan | $175,000 | $150,300 |
| Middle half of loans | $50,000 to $500,000 | |
| 90th percentile loan | $1,557,600 | |
| Loans of $1 million or more | 22 (14.8%) | |
| Median rate at approval | 10.25% (middle half 9% to 11.25%) | 10.25% |
| Fixed-rate share | 16.1% | |
| Acquisitions | 10 loans (6.7%), median $969,000 at 8.25% | 10.4% of loans |
| Start-ups / franchises | 25.5% / 18.1% of loans | |
| SBA Express | 19.5% of loans | |
| Median jobs supported | 12 |
The spread is wide. A quarter of loans were $50,000 or less and 22 were $1 million or more, which reflects two different kinds of borrower: small programs borrowing for working capital or a fit-out, and operators buying or building a facility. The 72 lenders behind 149 loans work out to about two loans each, so most lenders see few files like this one. A borrower should expect to explain the business model to a lender that has not underwritten many like it.
A median of 12 jobs supported per loan is high for a small service business. These are staffing businesses in practice, and payroll is the largest cost a lender will look at.
Who pays: the revenue lenders pick apart
A lender's first question here is where the money comes from, because each source is paid differently and each can stop for a different reason.
| Revenue source | How it arrives | What a lender asks |
|---|---|---|
| State or county contracts (per-child or per-day rates) | Billed monthly, paid on the agency's schedule | Contract term, renewal history, how rates are set and how long payment takes |
| Medicaid for therapeutic or behavioral services | Claims paid after service | Enrollment, denial rates, and any audit or recoupment history |
| School district or municipal contracts | Invoiced on terms, often by school year | Whether the contract renews each year and what happens in summer |
| Parent-paid tuition and program fees | Paid in advance or monthly | Enrollment trend, waitlists, and how many families pay late |
| Grants | Awarded for a period, sometimes restricted | Whether the grant repeats; most lenders give non-recurring grants little weight |
A business with most of its revenue under one state or county contract carries a concentration a lender cannot ignore, however reliable that agency has been. Expect questions on how many years the contract has renewed, whether it is competitively rebid, and what the business would look like without it. See customer concentration and debt.
Government payers can also be slow. Where receivables are large, a line of credit secured by them can bridge the gap between the service and the payment. Asset-based lenders typically advance 80% to 90% of eligible receivables, and receivables more than 90 days past invoice are typically ineligible, so an agency that is paid late gets less from its borrowing base. See lines of credit for government contractors and eligible vs ineligible receivables.
Licenses, people and insurance
Most businesses in this code operate under a state license or a certification from the agency that pays them. The license is the business: without it, the contracts end. A lender will want the current license, recent inspection or monitoring reports, and any corrective action plans, and will read them for anything that could put the license at risk.
- Key people. Licenses often require a qualified director or clinical supervisor. If that person is the owner, the lender will ask who steps in if they leave, and may ask for life insurance on them. See key person life insurance.
- Staffing. Background checks, training and required staffing levels set the cost base. Turnover and wage pressure hit margins directly.
- Liability coverage. Lenders ask for general liability and abuse and molestation coverage and check that they are in force. A gap in coverage is a serious issue in this industry.
- Franchise programs. Franchises were 18.1% of loans. A franchised youth program gives a lender a known model, but royalties and marketing fees come off the top before debt service.
Bring the license, the last monitoring report and the insurance certificates to the first conversation. They answer the lender's hardest questions before they are asked.
Why the building matters so much
SBA 504 financed 79 projects in this industry at a median of $553,000, more than half as many as the 149 7(a) loans. That is a high ratio, and it reflects how much these businesses depend on a suitable building: a licensed facility, zoned and inspected for use by children, is hard to find and expensive to replace. Owning it removes the risk of a landlord declining to renew.
504 finances owner-occupied real estate and long-life equipment, typically 50% from a bank, 40% from a certified development company and 10% from the borrower, rising to 15% for a new business or special-purpose property and 20% for both. The business must occupy at least 51% of an existing building, or 60% of new construction. On a 7(a) loan, real estate can take a maturity of up to 25 years. See SBA 7(a) vs SBA 504 and SBA 504 vs a conventional commercial mortgage.
Starting or buying a program
Start-ups were 25.5% of loans. For a new program, a lender underwrites the owner's experience in the field, the licensing timeline, and a projection that shows how long it takes to fill enrollment or placements. SBA requires an equity injection of at least 10% of total project costs; on a project of 800, that is at least 80 from the owner.
Acquisitions were only 10 loans (6.7%), below the national 10.4%, but at a median of $969,000 and a median rate of 8.25% they were large and priced well. Ten loans is a small sample, so treat those medians as a sign of what is possible rather than a benchmark. Few of these businesses change hands, partly because the license and the government contracts may not move with a sale: a new owner may need state approval, and a contracting agency may need to consent to the change. A buyer should confirm both before the letter of intent is final. See change-of-control consents.
SBA's change-of-ownership rules apply: at least 10% of total project costs as equity; a seller note counting for up to half of that only on full standby for the life of the SBA loan; no earnout; and a business valuation where the amount financed, less appraised real estate and equipment, exceeds $250,000. From 1 October 2026, under SOP 50 10 8.1, the deal must show debt service coverage of 1.25x on historical results and financial due diligence is required. The seller may stay on as a consultant for up to 12 months, or up to 24 months from that date, which helps when the seller holds the relationships with the contracting agencies. See financing a daycare acquisition for a closely related purchase.
Preparing the file
The standard SBA documents apply: business tax returns for 2–3 years, a P&L, a balance sheet, a year-to-date P&L through last month-end, a debt schedule with copies of notes being refinanced, and personal tax returns and a personal financial statement for each owner of 20% or more. Each of those owners personally guarantees the loan.
Add what this industry's lenders ask for next: revenue by payer for at least two years, the contracts themselves with their renewal dates, an aging of what agencies owe, the license and recent monitoring reports, insurance certificates, and census or enrollment by month. For an acquisition, add the target's latest full year of figures and the letter of intent.
Transparent builds that file into a full lender package — financing model, lender presentation, blind teaser and underwriting memo — in a day, and takes it to the 278 lenders in its book that write SBA 7(a) and 504. On SBA loans the lender pays Transparent, not the borrower. See how we underwrite.
Common questions
- Can a nonprofit youth organization get an SBA loan?
- No. SBA 7(a) and 504 loans go only to for-profit businesses. A nonprofit would look to conventional bank or community lending instead.
- Do lenders count state contract revenue?
- Yes, and many like it, but they read the contract closely: its term, how often it has renewed, whether it is rebid, and how quickly the agency pays. Heavy dependence on one contract is a concentration risk.
- Why do so many child and youth services borrowers use SBA 504?
- Because a licensed facility suited to children is hard to replace, and owning it removes the lease risk. The industry had 79 SBA 504 projects at a median of $553,000, against 149 7(a) loans.
- Does my license transfer if I sell the business?
- Often not automatically. A new owner may need state approval and the contracting agencies may need to consent. Buyers should confirm both before signing a letter of intent.
- What rate do child and youth services pay on SBA loans?
- The median rate at approval was 10.25%, level with the national median, with the middle half between 9% and 11.25%. Acquisition loans had a median rate of 8.25%.