The day nursery market is growing rapidly, with new investors looking at it as an area of growth and group buyers purchasing nationwide. If as a purchaser you have the backing of an investment fund, or the boardof a large group, then they can see that multiples of EBITDA [earnings before interest, taxes, depreciation and amortisation] are going up, and will continue to do so, resulting in keen investment strategies.
The same can be said for existing owners who are looking to continue growth of a small group.
For first-time buyers, the money is not flowing as easily, and this is common in markets where consolidation is at the early stages. As the market continues to grow then more lenders will look towards the individual buyers as a growth area themselves. But we are not there yet, so if you are a first-time buyer, while there are lenders out there, be prepared to have to jump through some hoops to achieve finance.
If you have experience in the sector, you are already ahead of the game. You will still need a strong business plan and cashflow forecast, but they will see you as a good candidate for lending. You will still need a deposit, however. For first-time buyers without experience in the sector, lending is tough, even if you have a deposit beyond the 30 per cent.
Looking at a manager-led setting, in which you have little or no day-to-day input while you learn the sector, is seen as asking the bank to trust the unknown. If you are a first-time buyer with no experience in the sector, the advice is simple. Get some! Ideally work in a setting and get your qualification or look to volunteer in a setting if that isn’t feasible. Look for a mentor or champion who is already in the sector from whom you can learn the ropes and the business. It may feel like your buying journey will take longer, but it takes most buyers at least two years to find their setting. If you use that time wisely, the bank is more likely to support you in your purchase.
