Finance for nursery schools

Working with young children in a nursery school may be a vocation, but it still requires real business funding.

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Funding options


Asset Funding

  • Spread equipment costs over 6-60 months
  • Rates from 6%
  • Undercut ’0%’ deals from equipment suppliers
  • Balloon payment options - reduce monthly outgoings

Working Capital

  • Avoid cashflow problems
  • Bridge funding gaps
  • Funds available at short notice
  • Pay staff, suppliers and ongoing costs

Property Funding

  • Funding for lease agreements
  • Secured lending - from 2% above base rate
  • Raising funds with a Commercial Mortgage 2% above base rate
  • ‘Jigsaw’ funding options

Talk to Rangewell – the business finance experts

Many lenders are wary of the nursery school sector, and some will only lend at high rates. At Rangewell our expertise and contacts across the entire lending market help us find you the most competitive funding for your needs.

At Rangewell we recognise your professional status, and we work harder to find you better solutions - which can include 100% finance for many of your needs.

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The nursery school and nursery day-care sector in the UK is worth around £4 billion a year. An estimated 23,500 day nurseries employ over 188,000 people and offer more than 1,000,000 childcare places. It is growing fast - but with high standards imposed by legislation as well as demanding parents, funding is vital to succeed.

Table of Contents

Day-care nurseries care for children aged from birth to five years and usually offer daycare from 8am to 6pm, for most of the year. All day nurseries will be registered with Ofsted but can be run by private individuals, community groups, Montessori organisations, commercial businesses or by employers. The trend for parents to seek employment is driving demand.

There are chains with multiple locations, but none of the leading players has a market share close to 5%. There is, therefore, plenty of opportunity for smaller local and regional operators.

However, although there is a growing demand for nursery places, there remain significant challenges. High levels of supervision are required, limiting the numbers of children who can use each centre and putting tight limits on revenues.

Margins are tight - but with work an economic necessity for many parents and government initiatives, such as the Tax-free Childcare Scheme and Early Years Pupil Premium (EYPP) to support childcare, it is possible to turn a nursery into a profitable business. The key factor in this success can be the ability to access the necessary funding to set up and support your nursery business.

At Rangewell, we work with nurseries across the UK to find the financial solutions they need.

Understanding your funding options

Our team are experienced in understanding the challenges nurseries face, and we can find a wide range of financial solutions.

These may include funding options for:

  • Staffing costs
  • Property finance
  • Acquiring equipment and assets

Staffing costs

Staff costs often make up around 80% of the costs of running a nursery. The ratio of staff to children is set out by legislation and can be as high as one adult for every two children, in the case of children under 2.

Not only are the numbers of staff required specified, but there are qualifications for working with children from birth to five-years-old which must be held. All members of staff must have had appropriate police checks, and the manager of your nursery business must also have at least two years’ experience as a qualified nursery nurse, a minimum of one years’ experience in a supervisory role, plus a relevant nursery qualification.

While individual salaries may be relatively modest, the need to have high numbers of staff will mean that your overall wage bill will be high. There will be additional costs to comply with all the necessary employment laws and health and safety regulations for your staff, and you will need to offer continuing professional development (CPD) training to staff.

Being faced with a weekly or monthly salary bill can make a major demand on your cash flow, especially in the early stages of your nursery business when you may still have spare capacity.

At Rangewell we can help find solutions, such as Working Capital Loans, which can support your cash flow and provide the funds to pay staff. These can be particularly effective in the early days of your nursery and are designed to be repaid when you have achieved full profitability.

Property costs

Premises will also be a major cost for your nursery business. There are minimum space requirements, and you must provide a minimum of one toilet and one wash hand basin with hot and cold water for every 10 children.

Your nursery premises must be safe and secure, and it’s essential that any furniture and equipment within must be well maintained and conform to relevant safety standards. Outside space is desirable, and although it is not essential it could be a powerful factor in attracting parents.

You can either rent or buy, but it is important to have a reasonable lease on the property as it will be costly and disruptive to move once your business is established.

Location is important, as you will need ample parking space for staff and parents. Unless you are moving into an existing nursery premises, you are likely to need to apply for planning permission.

Popular options include:

Buy or rent existing commercial premises - You may need to factor in several thousand pounds to bring it up to fire safety standards; for example, ensuring that you could evacuate all the children in an emergency. You should also ensure that there is adequate security, with locks on doors and windows to keep strangers out and children in.

Buy an existing residential property - A residential property may have advantages such as a garden, but it may still require upgrading, and the difficulties of getting planning permission may be greater.

Modular nurseries - These can simply be ordered and delivered to get your business up and running very quickly, but are not always popular with local planning authorities – particularly if you are in a green belt area. However, costs can be much lower than the other solutions.

Lease support and Commercial Mortgages

There are a number of funding solutions to provide the premises you need.

If you are considering leasing, we help find funding for initial deposits, and to deal with costs during the early stages of your business. We can also help you arrange Commercial Mortgages to buy your nursery premises.

A Commercial Mortgage operates much like a residential mortgage. The loan is secured on the property itself, and can run for 15 years or more. It can be used to buy land and existing premises of all types. However, unlike a residential mortgage, the rates for a Commercial Mortgage are always arranged on an individual basis. Lenders will look at your financial propositions and projections to establish a fair rate. Our knowledge of the lenders and rates available can be essential to achieve a competitive deal.

Buying run-down property may be difficult with conventional mortgage funding. Refurbishment Finance can provide the means to buy property and to convert it to the standards required to open a nursery business.

Equipment costs

You will need to provide a wide range of equipment for your nursery. Cots will be essential for younger children and you will need beds, desks and chairs. All will need to meet the relevant safety standards.

You will also need a kitchen and play equipment. Costs may be ongoing - with up to 25 children playing all day long, items like toys and play equipment will wear out more quickly than at home.

Hire Purchase

Many of these items represent a one-off investment, but if you have to provide them all from your cash reserves, it can mean a serious drain on your resources. Hire Purchase (HP) provides a simple answer to let you spread the cost of buying the equipment you need. Arrangements generally last between 6 and 60 months. You pay a deposit plus fixed monthly instalments for the agreed term, after which the assets become yours.

At Rangewell, we can often help set up HP agreements that undercut those of equipment suppliers, or which let you take advantage of the lower costs of pre-owned equipment.

Finance and Operating Leases

Finance and Operating leases work like rental agreements and let you spread the cost of equipment with no upfront payment. This type of finance could be the best option for equipment which will have a limited life. You can simply return it to the finance house at the end of the lease, leaving you free to update your equipment.

How we can help you capitalise your nursery business

At Rangewell, we work across the entire lending industry. Our finance experts know the types of finance products available and are experienced in putting them to work for clients of all types.

We put this knowledge to work for you, finding the most competitive deals for your staff costs, property, and equipment needs.

As well as conventional finance products, we can help you find Alternative Funding solutions, using new loan providers and less common styles of funding. We know the lenders who can offer the most competitive rates for your sector, whether you have a straightforward finance need or require a more complicated ‘Jigsaw’ funding plan made up of a combination of lending types, meaning we have the answers you need.

Simply call us now to find out more.

Last update: 15 June 2023

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