Co-authored by Paul Quintero, Ascendus and Colleen Galvin, Citi Community Development
Underfinanced Childcare Businesses: The Costs
Growing up in Harlem with six siblings, Elizabeth Galloway’s life was not always comfortable. “Poverty levels were out of this world.” Yet despite the difficulties she faced, one opportunity arose that would impact her for the rest of her life. “There was this one particular school that provided a music program. I played the flute and I loved it. It changed my way of thinking.” It was a moment that would eventually lead to Elizabeth and her mother launching their home-based childcare business in the Bronx many years later.
Childcare providers like Elizabeth offer a critical service that allows parents to work and earn money for their families, each and every day. They also provide kids with some of their earliest opportunities for learning and development – like the musical instruments Elizabeth provides at her childcare facility. Moreover, as small businesses, childcare providers create new jobs, invest in our neighborhoods, and provide a critical community service.
Yet, despite their many contributions to our local economies, childcare providers are frequently excluded from accessing the financing and resources they need to grow their businesses – and their neighborhood impact. A 2015 report found that childcare providers struggle with cash flow challenges, significant constraints on their time, volatility in income, and limited financial acumen. In other words, childcare providers have been left underequipped to provide an essential community service.
Access to childcare is a national need, and one of increasing concern. When families struggle to access childcare we see the economic impact on children, families, women, and the economy at large.
Collaboration with Citi and Ascendus: Piloting the Childcare Provider Initiative
Supporting small businesses that provide childcare services is more urgent than ever. Ascendus Childcare Provider Initiative leverages its proven microlending program to serve these entrepreneurs, who otherwise would be unable to access economic opportunity. Citi Community Development, as the program’s Founding Corporate Partner, provided seed funding, industry introductions, and expertise in bringing this new program to life – allowing us, together, to forge new paths of access for childcare entrepreneurs in New York City.
Using insights gained from human-centered design workshops and intensive research of and in the field, Ascendus designed an offering that responded to the key needs of providers, which included a simple, stress-free process with manageable monthly payments. Licensed home-based childcare providers with three years in business can prequalify with Ascendus for up to $20,000 with just a fifteen-minute phone call. This is made possible by leveraging mandatory, publicly available childcare provider licensure, which is backed by rigorous statewide oversight. As a result, Ascendus is able to provide all the paperwork required to close within 48 hours of the initial call. Childcare loans also come with longer terms than the typical microloan product; by expanding terms, Ascendus is providing larger loan amounts with lower monthly payments.
Since launching in 2018, the initiative has placed over $2M in the hands of 137 childcare providers like Elizabeth. That means new and sustained access to workforce participation for single mothers and working parents, as well as access to quality childcare for 1,000 children. Of these childcare providers, 97% identify as women of color. The majority of these entrepreneurs (66%) claim English as a second language and 85% are low-to-moderate income – illustrating that we’re on the right track in reaching the highest-potential, but most-challenged entrepreneurs and the communities they serve.
Elizabeth’s company, O&E Childcare, now has five employees – each pursing their own career in childcare. The 15 children enrolled receive tutoring, music, dance, and exercise activities that build their self-confidence. As Elizabeth says, “Bringing resources and hope to a child’s life, it means everything.”
Scaling the Pilot: Impact Beyond the South Bronx
Having proven the model in the South Bronx, and with additional support from Citi and other funders for expansion, Ascendus is poised to expand this program to reach childcare entrepreneurs in new markets. Ascendus is currently scaling the work across New York City, and is replicating in Boston and Miami– tapping into additional urban markets with critical need for childcare services.
The Childcare Provider Initiative shows us what is possible through collaboration: with Citi’s leadership, Ascendus was able to develop a pilot model, which not only meets the specific needs of the targeted clients, but is also scalable to meet these same needs in other markets.
Together, we’re helping more entrepreneurs to achieve their dreams and equipping them to revitalize their communities from within.