Navigating the lending landscape for the early years sector

2020 has been a year we will never forget. The Covid-19 pandemic has changed the way we live and work, and continues to present daily challenges for people, businesses and communities globally.

Stuart Blair

Stuart Blair, director, debt finance at OakNorth Bank, writes:

For OakNorth Bank, it is the second unprecedented event we’ve experienced (the first being Brexit) in our fairly short history, and it’s been interesting to see how the early years sector has fared.

When it comes to lending to this sector, our clients include operators who have one nursery setting but are looking to open more in the future, through to private equity-backed groups that might have 20-30 nursery settings. It’s a sector that we’ve put a great deal of emphasis on since our launch in 2015 and have continued to support over the years.

We’ve done several deals in the space this year:

  • A £750k loan to Bright Minds Daycare to fund refurbishments and working capital requirements, as well as purchase new equipment

  • A Coronavirus Business Interruption Loan Scheme (CBILS) loan to Little Explorers Day Nurseries to support the acquisition and development of a second nursery

  • A loan to support an unnamed private equity firm with its nursery buy and build strategy.

At the Education Investor Summit which took place in early December, I spoke with Joel Selvadurai, founder of MiChild Group and Jonathan Jay, managing director at Welcome Nurseries to reflect on the lending landscape for the early years sector. As part of our discussion we spoke about the ongoing challenges in the space, the ways in which nursery owners and operators could secure capital to grow or withstand these challenges, as well as our predictions for the sector in 2021.

The pandemic was particularly difficult for nurseries during the first lockdown between March and June, when they were forced to close and had little time to adapt their business model or prepare for this. However, with the second lockdown being less strict and nurseries being able to stay open, many have bounced back.

I expect the sector to do particularly well from 2022 onwards as a result of the lockdown baby boom which will see demand for nurseries soar. According to data from Mumsnet, the UK could be heading towards a baby boom in the first half of 2021 with the number of people posting in its Conception forum being twice the levels of 2019. Nursery owners and operators looking to capitalise on this opportunity should start thinking about their growth strategy now and how they can fund an extension of their existing nurseries or start new ones. This is where OakNorth Bank comes in – we’d be happy to discuss any funding requirements you may have and if we can help.



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