Refinancing a childcare centre's loans means looking at the loan used to buy the centre, the fit-out and playground, the kitchen and room equipment and, if you own it, the building, then deciding which to move, combine or leave. This guide sets them side by side and shows what a new rate, term or security does to the monthly repayment and the interest still to pay.
Was the loan you took to buy the centre sized on the vendor's occupancy, and are you now repaying it on the enrolments you have built yourself? Have this year's award increases for your educators made the fortnightly pay run heavier against the subsidy that arrives each week? Are the shade sails and soft-fall in the yard due for replacing while the loan that paid for them is still running? Have a rating visit, a roster gap and the January enrolment change left no time to sort any of it out?
The Department of Education's Child Care Subsidy report for the June quarter 2026 counts 9,963 Centre Based Day Care services, 279 more than a year earlier, and $3.31B of that quarter's subsidy went to families using them. Much of each family's fee is paid by the government on their behalf, and that subsidy shows on a centre's statements as its own line of income.
We would be glad to go through each of your centre's loans with you. Ardent Capital Group can assist with refinancing the purchase loan, the fit-out and playground, the equipment and the building itself.
Where the pressure on a centre's repayments comes from
A childcare centre earns its income one booked session at a time, while its loan repayments stay the same every month. The purchase loan dates from when you bought the centre. The repayment is fixed in dollars, but wages, staffing ratios, fees and enrolments have all moved since.
- Wages. The Children's Services Award changed from 1 March 2026, with a new classification structure. Pay increases are applied in stages, the first from 1 March 2026 and the second from 30 June 2026. Most award employees also received the 4.75% annual wage review increase from 1 July 2026.
- Ratios. Each age group has a set number of children per educator, such as one educator for every four children under two. That ratio is counted against the children attending, so the roster rises and falls in steps with attendance.
- Fees. Providers in the government's worker retention payment receive grant funding toward higher educator wages. In return, they agree to limit fee increases. The program now runs to 30 June 2028.
- Enrolments. The same June quarter report shows 2.6% fewer families using centre-based care than a year earlier. A new centre nearby can be enrolling children from the same streets.
What refinancing can change is how much of the centre's income goes to lenders each month, and for how many years.
Example: a leased long day care centre's loans side by side
A centre's loans are easier to weigh up once they sit in one place. These figures are illustrative. The operator leases a long day care centre and bought the business with a loan four years ago. Since then, two rooms and the yard have been refurbished, and a new kitchen, laundry machines and cots have been financed.
The table lists each loan with its balance, rate and months left, and what leaves the centre's account each month.
| Loan | Owing | Rate | Time left | Each month |
|---|---|---|---|---|
| Loan used to buy the centre | $1.6M | 9% (assumed) | 84 months | $25,743 |
| Loan on the fit-out and playground | $240k | 11.5% (assumed) | 48 months | $6,261 |
| Kitchen, laundry and room equipment loan | $45k | 12% (assumed) | 30 months | $1,744 |
| Total | $1.885M | $33,748 |
The centre still owes $1.6M on the loan used to buy it, at an assumed 9%, with 84 months to run, and repays $25,743 a month. Together, the three repayments total $33,748 a month. That total drops once the equipment loan ends in month 30, and again when the fit-out loan ends in month 48.
The centre also has a $150k overdraft with $90k drawn. At an assumed 10.5%, it costs about $788 a month in interest, and it is left out of every refinance option in this guide. Each rate here is an assumption chosen to show the mechanics, never a rate on offer.
How a refinance changes a centre's loan
A refinance swaps one or more of the centre's loans for a new loan on new terms. Three levers decide what that does to the centre's cash each month and its cost over the years.
- Rate. Over the same number of months, a lower rate means less to repay each month and less interest overall. The rate a lender offers depends on what secures the loan, how the centre is trading, and the credit records of its directors and the business.
- Term. The term is the number of months the loan runs for. Stretching it over more months lowers each repayment. The balance is owed for longer, though, so the centre pays more interest in total. That can still suit a centre for a known stretch, such as the months a refurbished room takes to fill.
- What secures it. Security is what the lender can call on if the loan is not repaid. Pledging property generally brings a lower rate than relying on the business alone, and that property then secures the centre's debt.
The loans here are amortising: each one runs down to nil by the end of the term, unless it ends in a balloon, a lump sum left to the final repayment. Each repayment covers some interest and some of the balance. Interest is worked out on what is still owed, so the early months carry the most.
Worked example: one month on the purchase loan
Splitting one repayment in two shows how much of the centre's money goes to interest early on. Take the $1.6M purchase loan at an assumed 9%. In the first month, the interest is $12,000. That leaves about $13,743 of the $25,743 repayment to come off the balance. Twelve months on, the balance is about $171,900 lower.
Refinancing each loan the centre carries
Each of a centre's loans paid for something different: the business itself, the rooms and yard, or the kitchen, laundry and cots.
The loan used to buy the centre
For an operator who bought an existing centre, this is the largest debt. It paid for the goodwill, the enrolments and the equipment in place at settlement. Goodwill is the value the business carries beyond its equipment, because families choose it.
Lenders call it a business purchase or goodwill loan. It is commonly secured by a general security agreement, guarantees from the directors and sometimes property. A general security agreement gives the lender a claim over everything the business owns, from cots to money owed by families. A director's guarantee is a personal promise to repay if the business cannot. Because the goodwill depends on the centre trading from its building, it lasts only as long as the lease.
A new lender can offer a different rate, term and security. Subject to assessment, it can also include funds for works. The application shows the centre as it trades today: licensed places, occupancy by room, fee income and wages. Where occupancy has dipped, confirmed enrolments for the coming months can go in with it.
A fixed rate on this loan can carry a break cost, a fee for ending a fixed rate early. The more rates have fallen since the rate was fixed, the bigger it is. It helps to ask for a written payout figure first, the sum needed to pay out each loan on a set date.
Fit-out, playground and the lease
The refurbishment is what families see when they walk in, and in a leased centre it is built into someone else's building. A refurbishment loan in a leased centre pays for things that stay with the building. Inside, that means partitions and joinery, nappy change and children's bathrooms, sleep rooms and the kitchen fit-out. Outside, it is the yard's soft-fall, synthetic turf, sandpit, shade sails and fixed play equipment. The make-good clause sets what has to be removed or restored when the lease ends, returning the premises to the condition the lease requires.
A lender matches a fit-out term to the years left on the lease. An option is the right in the lease to renew for a further term. Rolling the fit-out balance into the purchase loan, as one of the refinance options does, spreads it over a longer term. That new term needs to finish inside the lease. Soft-fall and shade sails also wear out well before joinery does.
Kitchen, laundry and room equipment
A centre's equipment works hard every day and wears out long before the building around it. A centre that cooks on site runs commercial dishwashers, ovens and cold storage. A laundry washes bedding and bibs every day. The rooms add cots, sleep mats and high chairs. These loans are commonly secured by the equipment itself. Kept as separate loans, each one can end close to the working life of what it bought. Folded into a 10-year loan, a 30-month equipment balance would mean paying interest on a dishwasher for a decade.
If you own the building
An owner-operator who holds the freehold carries a property loan as well, and that is where most of the equity sits. A childcare centre is specialised security, meaning a property built for one kind of business. It is valued by capitalising its income: the valuer converts the income the property can earn into a value using a market yield. Lenders then gear it to 50% to 65% of a current valuation. That percentage is the loan-to-value ratio, or LVR. Bank terms on commercial property commonly run 10 to 15 years, and non-bank terms 25 to 30. Our page on refinancing a childcare centre you own covers that loan, including releasing equity to clear the business debts.
The overdraft and the ATO
Subsidy comes in and educators' pay goes out on different timetables, and the overdraft fills the gap between them.
Services Australia pays the Child Care Subsidy to the provider against weekly session reports. The provider passes it to families as a fee reduction within 14 days. Families then pay the gap fee, the share of the fee the subsidy leaves over. Educators are paid on payday regardless, and the overdraft carries the days in between. If the overdraft balance is rolled into a term loan, the balance is cleared and the limit is gone.
Subject to the lender, the refinance can also pay off a payment plan the centre has with the ATO. That plan might cover tax owing on the business activity statement (BAS), or the tax withheld from educators' wages under PAYG withholding. Business loan interest may be tax deductible, while ATO interest charges have not been since 1 July 2025. The centre's accountant confirms how each one applies.
Putting the centre's loans together
With each loan understood on its own, the question becomes how the centre's purchase, refurbishment and equipment debts could sit together.
Worked example: five ways to carry the same $1.885M
Side by side, these five options show that a lower repayment and lower interest do not always go together. Each is measured against leaving everything as it is, by what it does to the repayment and to the interest left until the debt is cleared.
| Option | Monthly repayments | Difference each month | Interest still to pay | Difference in interest |
|---|---|---|---|---|
| Leave the three loans as they are Today | $33,748 | Starting point | $630k | Starting point |
| Move the purchase loan to a lower rate, same 84 months | $32,943 | $805 less | $563k | $67k less |
| Combine the purchase loan and the fit-out loan over 84 months | $30,883 | $2,865 less | $615k | $15k less |
| Combine all three into one 10-year loan | $23,371 | $10,377 less | $920k | $290k more |
| Combine all three with the home added as security, over 20 years | $14,614 | $19,134 less | $1,622k | $992k more |
Illustrative, rounded figures. Every rate is an assumption made for the arithmetic, not a current rate or a quote. The overdraft, break costs on fixed rates, payout and establishment fees, and valuation costs are left out.
Adding the home and spreading all three loans over 20 years cuts the repayment by $19,134 a month. It also adds $992k of interest, because the balance runs for many more months. The cots and play equipment inside that loan would be replaced before it ends.
By contrast, a lower rate on the purchase loan alone saves $67k of interest without lengthening anything. The smallest monthly repayment is the one that costs the centre the most over its life.
The 10-year and 20-year options swap relief now for cost later. Which of these suits the centre depends on occupancy, the lease, and when the rooms and yard next need work. We would line up each loan with its payout letter and set the options out on repayment and interest. The option you choose then goes to lenders whose policy fits a long day care centre. These figures are not quotes or approvals.
What can secure the refinanced loans
A centre has several things it can offer a lender as security.
- The business. A general security agreement is registered on the PPSR, the national register of security interests in personal property. It does not cover land, buildings or fixtures to land. When the old loans are paid out, that registration is lifted and the new lender lodges its own.
- Directors' guarantees. Purchase and unsecured business loans usually come with a guarantee from every director.
- The home. Offering the home can lower the rate and lengthen the term on offer, and the home then backs the centre's debt. That decision is yours, weighed against the extra interest a longer term adds. If the home already backs the purchase loan, it can come off in a later refinance once the centre's trading supports the debt without it. Our home loans for business owners deal with the mortgage itself.
- The freehold. A centre you own can secure the business debts as well as its own loan, within the 50% to 65% LVR lenders apply to specialised security.
Two centres, or a separate property entity
Some owners hold the building in a family trust, or trade a second centre through its own company. Where a company runs the centre and a family trust owns the building, the lender works through every entity and guarantor. That includes the rent paid between the entities and each director's own borrowing.
Before you apply to refinance the centre
A centre's year runs to its own rhythm of enrolments, ratings and lease dates, which shapes what a lender sees.
Timing, and what to have ready
A few dates on the centre's calendar change what the refinance costs or what a lender will count.
- A break cost bigger than the saving. It helps to ask for written payout figures first. If a fixed rate's break cost outweighs the saving, the refinance can be looked at again nearer the end of the fixed period.
- The start of the year. The oldest children leave for school and new families start across January and February. Occupancy reports through to March show the year's settled numbers.
- A rating assessment underway. Lenders ask for the centre's current rating against the National Quality Standard, the national benchmark for early childhood services. They also ask for the latest assessment and rating report, so an application can be timed around when that report is due.
- A lease close to its end. A short lease leaves fewer years for a fit-out loan to run against.
- Unlodged BAS or tax returns. It helps to lodge any outstanding BAS or tax returns before applying.
Occupancy, subsidy, gap fees and wages
A centre's income comes in two streams, subsidy from the government and gap fees from families, with wages running against both.
- Licensed places and occupancy. The service approval caps how many children the centre can care for at once, and occupancy is counted against those places, room by room and day by day.
- Subsidy and gap fees. Each Child Care Subsidy payment comes with a payment advice. Families must pay gap fees electronically, by direct debit, card or bank transfer. Together, the payment advices and bank statements show what has been received, and the fee records show any gap fees still overdue.
- Wages against income. Wages, set by the award and the ratios, are the biggest cost line. In a centre taking part in the worker retention payment, the grant and the higher wages it funds both show.
Documents to gather
Most of what a lender asks for already sits in the centre's approvals, its subsidy records and the accountant's files.
- Payout letters for each loan, with any break cost or early payout fee
- Provider and service approvals, the current rating and the latest assessment and rating report
- Twelve months of occupancy reports by room, and the current fee schedule
- Child Care Subsidy payment advices and recent statements for each business account
- BAS, two years of lodged financials and tax returns, and an ATO statement of account
- The lease with its options, rent reviews and make-good clause, and any worker retention payment grant agreement
- Refurbishment and equipment invoices, and each director's personal loan and card statements
Questions childcare centre owners ask about refinancing
I bought at 90% occupancy and we're lower now. Can the purchase loan still be refinanced?
Yes, it can be assessed on the trading the centre has now. It helps to bring 12 months of occupancy reports, the waitlist and confirmed enrolments for the months ahead.
My lease has eight years left plus a ten-year option. How long can a fit-out loan run?
It is set against the years left on the lease, subject to the lender. An option already exercised adds its ten years. How an option not yet exercised counts differs from lender to lender.
We're in the worker retention payment. How will a lender treat the grant?
The grant shows on the statements as income, beside the higher wages it pays for. The grant conditions limit fee increases, and the program now runs to 30 June 2028. How the grant is counted is up to each lender.
Our last rating was Working Towards. Does that count against us?
It can be considered alongside occupancy and trading, subject to the lender. The assessment and rating report, the quality improvement plan and what has changed since all help show the full picture.
Can I refinance without putting my house up?
Yes, that is one of the options. A purchase loan can be refinanced against the business and the directors' guarantees, subject to the lender. Adding the home generally lowers the rate and makes the home security for the centre's debt, so the choice is yours with both sides in view.
Subsidy comes in weekly but we pay educators fortnightly. Is an overdraft the answer?
An overdraft sized to the pay cycle carries the days between payday and the payments landing. Kept apart from the term loans, the limit is there again for the next cycle.
Can the new yard and two room refurbishments go into the same refinance?
Yes, works can be funded in the same application, subject to the lender. The quotes show the lender what the money pays for and that the works sit inside the lease.
I'm looking at a second centre next year. Should I refinance first?
The two are best looked at together. A refinance now sets the repayments a lender counts when it assesses the second purchase, and security offered for one affects what is left for the other.
Will a lender value my centre on what I paid for it?
Not on the price alone. A centre you own is valued by capitalising its current income, and the business is assessed on how it trades now. Either can come in above or below the price you paid.
If I spread everything over ten years, how much more interest is that?
For example, combining the three loans into one 10-year loan cuts $10,377 a month and adds $290k of interest against carrying on as is.
Working through your centre's loans with us
A refinance lines each of the centre's loans up with the lease, the life of what it bought, and the subsidy and gap fees that pay it back. The loans we can assist with at Ardent Capital Group include purchase loans, fit-out and equipment loans, the property loan on a centre you own, and the working capital and business loans for childcare centres that sit beside them. Drawing on a background in financial planning, the Ardent Capital Group team can develop a strategy for how the new loans fit your centre and household debts, and your accountant confirms the tax detail before you sign. When you are ready, we would be glad to sit down with your list of loans.
