Child Care Center

Child Care Center

Financial Planning and

Facilities Development Manual

All Rights Reserved. Copyright ? 2009 Insight Center for Community Economic Development

TABLE OF CONTENTS

About the Manual...........................................................................................................................1

Services Available from the National Economic Development and Law Center ..................................................................................................................................... 3

Acknowledgements ....................................................................................................................... 4

Chapter One: Budgeting and Basic Financial Statements ................................................................................ 5

Chapter Two: Developing Pro Formas and Determining Debt Capacity ........................................................25

Chapter Three: Developing a Child Care Business Plan .................................................................................... 41

Chapter Four: The Facilities Development Process ......................................................................................... 63

Appendix A: Where to Go for Help.............................................................................................85

Appendix B: Glossary of Terms ................................................................................................. 87

Bibliography ................................................................................................................................. 90

This publication is designed to provide accurate and useful information. However, it is written with the understanding that the Insight Center for Community Economic Development is not engaged in rendering legal, accounting, or professional services. If legal or expert assistance is required, the services of a professional should be sought.

About the Manual

Since 1991, the Insight Center for Community Economic Development (Insight Center) has been actively engaged in efforts to improve the financial skills of child care providers in order to facilitate the development of high-quality child care centers. Our research shows that there is a tremendous need in the child care field for information about financial management and the facility development process. To address this need, Insight Center, in collaboration with the Children's Collabrium, has produced two manuals: Child Care Center Financial Planning and Facilities Development Manual, and Family Child Care Financial Planning and Facilities Development Manual.

If you have questions about either of these manuals, the Insight Center for Community Economic Development can be reached at (510) 251-2600.

The goal of this manual is to help child care providers manage and understand the financial side of their businesses. Beyond the basic importance of using budgets and financial statements to run a business successfully, understanding the financial status of a business is essential to planning and undertaking a facility development project such as building, purchasing, renovating or expanding a child care center.

Because facility development projects are typically quite costly, it is especially important to be able to demonstrate to funders, typically lenders, that the business owner has a clear idea of what size development project is fiscally feasible, and an estimate of how large a loan the business can qualify for.

This Manual is not intended as a substitute for professional financial and business planning assistance. It is designed to help child care center owners and directors become more comfortable with the financial side of their businesses. The hope is that with this increased comfort, child care providers will be more prepared to access professional assistance and financial resources to help them succeed in developing their facilities.

This manual consists of four chapters, each of which addresses a key component of financial planning and the facility development process. These materials are directed at the nonprofit sector, but much of the material is applicable to the for-profit sector as well. A summary of each chapter is listed below.

Chapter One: Budgeting and Basic Financial Statements

Planning for a new or renovated child care facility should be based upon a solid understanding of finances. This chapter introduces the concept of budgeting and describes how to create basic, yet important financial statements.

Chapter Two: Developing Pro Formas and Determining Debt Capacity

This chapter provides a basic explanation of pro forma financial statements required by most lending institutions, as well as information about the financial criteria used to determine a business' capacity to carry debt. Understanding pro formas and debt capacity can help a business plan a project, be a more informed and attractive consumer of financing packages, and assess its ability to take on debt. To read this chapter the reader should be familiar with the topics covered in Chapter One.

Chapter Three: Developing A Child Care Business Plan

A business plan is a concisely written summary of a child care business and/or a proposed development project. Business plans are important for securing financing for a child care facility development project or just making a

Child Care Center Financial Planning and Facilities Development Manual

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