Perseverance Leads to Success
For Phillips, the opportunity for PWP to raise their game has always been there—parents in need of affordable, quality childcare is abundant within the community. But despite a great track-record and services in high-demand, accessing the necessary capital to support growth hasn’t been simple. Like Phillips, a disproportionate share of entrepreneurs working in childcare are women of color, a group that has historically faced the double disadvantage of gender and racial bias that limits access to traditional capital.
Traditional capital doesn’t always work for the childcare industry, especially in the early stages of business. For childcare centers that can apply for small business or traditional bank loans, the economics of the industry make it difficult for entrepreneurs to satisfy traditional underwriting criteria. Earlier in her career, Phillips encountered more hurdles than anticipated when applying for an SBA loan to expand her services. The process resulted in $10,000 of unrecovered costs to satisfy rigorous loan requirements. Most SBA loans only reach a small segment of the childcare sector —the largest and most established operators who often manage regional or national chains of childcare programs. This leaves most childcare businesses unable to access this type of funding without dipping into their cash reserves to meet the often-expensive health and safety standards needed to qualify. All the while, urgent capital needs, children in need of care, and facilities improvements mount.
Despite setbacks, Phillips wouldn’t let herself be deterred by the obstacles of the financial industry. She explains, “One bank didn’t work out, so I went to the next bank. I was determined to go through the financial industry until someone saw the value that I saw—which is we were a business in play for 29 years at that time, and we are worthy of funding.”
Unlike traditional banks or SBA loans, many CDFIs like Reinvestment Fund, are working to craft training and technical assistance programs that, together with loans, target the specific needs of childcare businesses. The Fund for Quality and ECE Loan Fund are two collaborations that illustrate how different sectors can work together to support high quality childcare.
Today, Phillips is an advocate for this approach, and through her story, she hopes to help other childcare business owners find mission-aligned financial institutions that see their value too.
Phillips’ achievements as an entrepreneur is a success story for the childcare sector and for West Philadelphia, that has historically faced socio-economic barriers to accessing capital. But PWP’s success took perseverance, and Phillips’ story of growth despite a system working against her, can shed light on the cross-organizational ecosystem necessary to support a thriving childcare sector—as well as the gaps and barriers that still exist.
FFQ is a partnership between Reinvestment Fund and Public Health Management Corporation (PHMC), supported by funding from the William Penn Foundation and Vanguard Strong Start for Kids Program™. By providing business planning support and facilities-related financing, FFQ supports high-quality early care and education providers with expanding their services to reach more low-income families.
The National Children’s Facilities Network (NCFN) and NCFN Executive Committee Member Reinvestment Fund have undertaken a research project to identify and map the financial institutions and intermediaries that help finance the childcare industry — including the childcare business operations and physical facility spaces. Stakeholders and community leaders can use the mapping tool to identify the sources of capital supporting childcare businesses in their community.