Should my daycare get a line of credit or a working capital advance?
Get a line of credit if the cash swing repeats — a subsidy lag every cycle, a summer enrollment dip every year — and you have 600+ credit, 12 months in business and $25,000 a month in deposits. Get a working capital advance if the need is one-time, you need it in 24 hours, or you do not clear the line’s credit and deposit floors; it has no minimum credit score and starts at $15,000 a month in deposits. The line costs nothing until you draw on it; the advance is a fixed amount with a fixed payback. Here is how each one behaves against a child care center’s cash cycle.
Published 2026-10-29 · Naptime Capital underwriting desk · No email required
The short answer
If your cash problem has a calendar — the agency reimbursement that posts weeks after attendance is submitted, the August payroll before September tuition, the summer dip when school-age kids leave — a line of credit is built for it. You open it once in a strong month, draw the week the gap opens, repay when the deposits land, and pay nothing in the months you do not touch it. If the problem is a single event — a licensing repair, a staffing push, a consolidation, or a payroll you need covered by tomorrow — a working capital advance funds in 24 hours with no credit minimum. Many centers use both: the advance for the first gap, the line once the file qualifies.
Side by side
| Criteria | Line of credit | Working capital advance |
|---|---|---|
| Amount | $25,000 – $500,000 line | $10,000 – $2,000,000 per advance |
| Minimum FICO | 600+ | None |
| Minimum time in business | 12 months | 6 months |
| Minimum monthly deposits | $25,000 | $15,000 |
| Speed | 1–3 business days to open; same-day draws after | Offer in about 4 business hours; funded in 24 hours |
| Repayment | Each draw repaid over 6–24 months; fixed ACH | Fixed daily or weekly ACH over 3–18 months |
| Cost when not in use | Nothing on an undrawn balance; no maintenance fee | Not applicable — the full amount is advanced on day one |
| Reuse | Revolving: repay and draw again without reapplying | One-time; a renewal is a new file |
| Best for | A swing that repeats every cycle or every year | A one-time need, speed, or a file under the line’s floors |
How each one behaves across a child care year
Think about the three swings most centers live with and how each structure handles them.
- The subsidy lag, every cycle. Care is delivered, attendance is submitted, the agency pays on its schedule. On a line, you draw payroll the week before the reimbursement and repay the week it lands, so the drawn balance is small and short-lived each time. On an advance, you borrow once and carry the fixed payment through the months the lag is not a problem. The line fits better; the payroll guide works through sizing it.
- Fall staffing before the first full tuition month. You hire in August, families pay in September. This happens once a year, every year, which is a line of credit pattern — draw in August, repay across the fall. A center that does not yet qualify for a line can take a short 3 to 6 month advance timed to end when fall tuition has caught up.
- Summer enrollment dip. School-age children leave in June and come back in late August. If your summer camp replaces the revenue, there is no gap to fund. If it does not, a draw on the line covers the dip and is repaid from the fall; an advance taken in spring with a 6 to 12 month term does the same thing at a fixed cost, which is the tool for a center still building toward the line’s floors.
The cost difference, plainly
A working capital advance is priced as a fixed total payback. The published representative file is $150,000 over 12 months with a total payback of $190,500, a cost of funding of $40,500 and a daily payment of $756 — an illustration, not an offer. The cost is fixed on day one whether or not you need the whole amount for the whole term, with up to 30% of the remaining cost returned if it is paid off inside the first 30, 60 or 90 days. A line charges only on the drawn balance for the days it is drawn, and nothing on the undrawn portion. For a center that needs money three weeks out of every six, that is the whole argument for the line. For a center that needs the full amount for the full term anyway, the advance’s fixed payback is easier to budget.
Why centers often start with the advance and move to the line
The line’s floors are higher: 600+ credit, 12 months in business and $25,000 a month in deposits, against no credit minimum, 6 months and $15,000 for the advance. A newer center or an owner with damaged credit frequently cannot open a line yet but can take an advance today. Using the advance well — fixed payments cleared, NSFs gone, deposits now running through one business account — is also what makes the line approvable six or twelve months later. If you are mostly subsidy-funded, both products count those deposits in full; see the bad credit guide for how the credit side is read.
What you’ll need
- For either: your 3 most recent months of business bank statements (4 if seasonal) and the 4-minute application
- For the line: 600+ FICO, 12 months in business, $25,000 a month in deposits — tuition, subsidy and voucher deposits all count
- For the advance: 6 months in business and $15,000 a month in deposits; no minimum credit score
- A note on which swing you are funding and when the deposits that repay it arrive, so the term or draw schedule can match it
- A list of any open advances, with balances
Deciding in one call
Send the statements and tell the desk what the money is for and when it comes back. If the file clears the line’s floors and the need repeats, you will be offered the line; if it does not, or you need the money tomorrow, you will be offered the advance with a term matched to the use. A center that invoices an employer, district or agency directly may also be shown invoice factoring, which is sized off the payer and has no credit minimum. The comparison on the solutions page lays all five products out together.
Related: Line of credit · Working capital · After-school programs · How much can a daycare borrow against its tuition deposits?.
Related questions
What does an unused daycare line of credit cost?
Nothing. Naptime Capital charges only on the drawn balance. There is no maintenance fee and no cost on an undrawn line, so a center can open it in a strong month and leave it untouched until the agency runs late.
Can a new daycare get a line of credit?
A line of credit needs 12 months in business, 600+ FICO and $25,000 a month in deposits. A center under those floors can take a working capital advance at 6 months in business, $15,000 a month in deposits and no minimum credit score, then open a line once it qualifies.
Can I have a line of credit and a working capital advance at the same time?
Often, yes, if the statements support both payments. Disclose the existing one when you apply for the other; an undisclosed advance is found at funding and ends the file, while a disclosed one is a structure conversation.
How fast can I draw on a line of credit once it is open?
Same business day. Opening the line takes 1 to 3 business days; after that a draw lands the same day you request it, which is what makes it work for a payroll the week before a late reimbursement.
Which one is better for a summer enrollment dip?
If the dip repeats every year and you qualify, a line of credit: draw in June, repay from fall tuition, pay nothing the rest of the year. If you do not yet qualify, a working capital advance taken in spring with a 6 to 12 month term covers the same gap at a fixed cost.
Get a real number, not a guide.
Four minutes and three bank statements. Offer in about four business hours, funded in 24. No minimum FICO for working capital.