Introduction
Starting a child care business in California requires not only passion and expertise in child development but also financial resources to cover startup costs, licensing fees, facility improvements, and operational expenses. Finding the right funding can be the difference between a struggling business and a thriving one. This guide explores various funding options available specifically for California child care providers, from government subsidies to loans designed for small businesses.
Key Information
California-Specific Funding Programs
Child Care and Development Fund (CCDF) Subsidies and Payment Programs
The CCDF supports various subsidized child care payment programs that create reliable income streams for providers serving eligible families.
Provider benefits: Consistent payments on a regular schedule, potential for Cost of Care Plus Rate Payments
Participation: Register as a subsidy-eligible provider through your local Alternative Payment Program (APP) or Resource & Referral (R&R) agency
Eligibility: Must meet licensing requirements and be willing to serve families that qualify for subsidies
Reimbursement Rates: Payment amounts are based on Regional Market Rate (RMR) ceilings that vary by:
County location
Type of care (center-based or family child care home)
Age of child (infant, preschool, school-age)
Hours of care (hourly, daily, weekly, monthly)
Provider's license status (licensed or license-exempt)
Understanding Reimbursement Ceilings:
Current RMR ceilings are set at the 75th percentile of the 2018 market rate survey
Providers can view county-specific rate ceilings at https://rcscc.adm.dss.ca.gov/
Higher reimbursement rates (adjustment factors) are available for:
Evening/weekend care (25% increase if 50%+ of care occurs during these times)
Children with exceptional needs (20-50% increase depending on severity)
License-exempt providers receive 70% of the family child care home ceiling rate
Subsidy programs administered through CCDF in California include:
Alternative Payment Programs: 70 programs across all 58 counties providing vouchers for over 161,000 children
CalWORKs Child Care: Three-stage program supporting families transitioning from welfare to work
Stage 1: Immediate child care for families receiving CalWORKs cash aid
Stage 2: For families with stabilized situations or transitioning off CalWORKs
Stage 3: Supports former CalWORKs families after 24 months off aid
Family Child Care Home Education Network (FCCHEN): Networks that support licensed family child care providers
Benefits: Professional development opportunities, educational resources, coaching/mentoring
Requirements: Must be a licensed family child care provider and meet quality standards
Support services: Educational support, assessment tools, parent engagement assistance
Focus: Emphasizes educational outcomes and developmental support
Payments are typically made monthly based on the number of children in care. For information on becoming a subsidized provider, contact your local Alternative Payment Program (APP) or Resource & Referral (R&R) agency.
California Child Care Initiative Project (CCIP)
The CCIP provides support and training to new and existing family child care providers, with a focus on increasing infant/toddler care and services in underserved communities.
Eligibility: New and existing family child care home providers, particularly those planning to care for infants and toddlers
Benefits:
Training on child development, health and safety, and business management
Licensing application assistance and pre-inspection home visits
Reimbursement for licensing requirements and equipment costs
Quality toys and learning materials
Application process: Contact your local Resource & Referral agency to inquire about CCIP participation
Priority areas: Infant/toddler care, underserved communities, and providers transitioning from license-exempt to licensed status
Local First 5 Commission Grants
Many county-level First 5 Commissions offer grants specifically for early childhood education providers in 2025. These opportunities vary by county:
First 5 Solano Annual Grants Program
Funding: Up to $20,000 per grant (total program: $120,000 for FY2025/26)
Deadline: March 10, 2025, at 5:00 PM
Duration: One-year grants (July 1, 2025, to June 30, 2026)
Eligibility: Projects must be in Solano County and benefit children 0-5, their parents/caregivers, or service providers
Focus: Projects addressing gaps in services, community disparities, or time-sensitive community needs
San Diego Workforce Pathways Grant (WPG) Stipend
Focus: Professional development for early learning and care teachers
Eligibility: Teachers, assistants, licensed providers, and ECE students in San Diego County
Priority: Non-subsidized settings, infant/toddler care, childcare deserts
Application: Through the California ECE Workforce Registry
Contact: San Diego County Office of Education for current details
San Francisco Stipend for Early Educator Professional Development (SEEPD)
Focus: Financial incentives for completing professional development milestones
Eligibility: Educators employed at DEC-funded Early Learning For All sites who participate in CARES 3.0 or EESSG
Application Period: June 1-30, 2025 through the CA ECE Workforce Registry
Funding: Varies based on milestones (up to $11,000 for multiple achievements)
Milestones: Child Development Permits, specialization certificates, degree completion, and coursework
Lake County Early Education Teacher Development Grant
Focus: Tuition support for early education credentials and degrees
Eligibility: Both existing educators and those pursuing early childhood education careers
Funding: Up to $2,800 for Bachelor's degree or teaching credential tuition, up to $375 for ECE units
Application: Available through Lake County Office of Education
Contact: Carly Swatosh-Sherman at Lake County Office of Education
Quality Rating and Improvement System (QRIS) Funding
Types: CSPP QRIS Block Grant ($50 million annually) and First 5 IMPACT initiatives
Application Deadline: March 14, 2025 for the CSPP QRIS Block Grant FY 2025-26
Eligibility: Local QRIS consortia implementing the Quality Continuum Framework
Focus: Enhancing quality in preschool programs serving low-income children
Connection: Directly linked to California State Preschool Program quality initiatives
Contact your county's First 5 Commission directly for specific opportunities in your area and current application deadlines.
Small Business Loans
SBA Microloans
The Small Business Administration's Microloan program provides loans up to $50,000 for small businesses, including child care providers.
Terms: Up to 6 years with interest rates between 8% and 13%
Uses: Working capital, supplies, furniture, fixtures, and equipment
Eligibility: For-profit child care businesses or non-profit centers that meet SBA size standards
Application process: Apply through SBA-approved intermediary lenders with business plan, financial statements, and tax returns
California lenders: CDC Small Business Finance, Opportunity Fund, and Working Solutions
Community Development Financial Institutions (CDFIs)
CDFIs specialize in lending to underserved communities and offer more flexible terms than traditional banks.
Loans up to $250,000 for working capital, equipment, and construction
No minimum credit score required, but personal guarantee needed
Provides free business advising and technical assistance
Offers grants and loans specifically for child care facility development
Focuses on quality improvements and increasing access in underserved areas
Provides specialized business support for child care operations
Other California CDFIs:
Accion Opportunity Fund: Small business loans for underserved communities
Mission Economic Development Agency (MEDA): Financial services and technical assistance, particularly in San Francisco
Self-Help Federal Credit Union: General business loans that can apply to child care
Rural Community Assistance Corporation: Loans for rural small businesses, including child care
Alternative Funding Sources
Small Business Grants
Several general small business grant programs are open to child care providers in California:
Amber Grants for Women:
Monthly grants of $10,000 with annual prizes of $25,000
Specifically lists education/child care as an eligible business category
Simple application process with rolling monthly deadlines
Limited to women-owned businesses
Application available at Amber Grants for Women
Verizon Small Business Digital Ready:
$10,000 grants offered periodically
Requires registration on their platform and completion of at least two courses or events
Open to all small businesses, including child care providers
Application available at Verizon Small Business Digital Ready
Tax Incentives and Credits
Child care businesses in California can benefit from several tax advantages:
Federal Tax Deductions for Home-Based Providers:
Business use of home deductions for:
Mortgage interest
Property taxes
Utilities (based on percentage used for business)
Deductions for:
Supplies and equipment
Toys and educational materials
Food and nutrition expenses for children's meals and snacks
Professional development and training expenses
Section 179 Deduction: Allows deducting the full cost of certain property (like playground equipment) in year of purchase rather than depreciating it over time
2025 Specifics:
Maximum deduction: $1,250,000
Deduction phases out when total qualifying purchases exceed $3,130,000
Qualifying Assets for Child Care Businesses:
Playground equipment (swings, slides, structures)
Educational technology and software
Classroom furniture and fixtures
Vehicles used for transporting children
Key Requirements:
Equipment must be used more than 50% for business purposes
Must be placed in service by the end of the tax year
Claimed using IRS Form 4562
Consult with a tax professional specializing in child care businesses
State Legislative Status: California's SB 533, which would have created employer child care tax credits, failed in February 2024. The bill would have provided a 30% credit for startup expenses and contributions to child care plans.
Federal Initiatives: Bipartisan federal legislation (Child Care Availability and Affordability Act) has been introduced to expand child care tax credits, including increasing the Employer-Provided Child Care Tax Credit (45F) and the Dependent Care Assistance Plan (DCAP) contribution limits.
Dependent Care Assistance Program (DCAP)
DCAP allows employees to set aside pre-tax dollars for child care expenses, creating opportunities for child care providers:
How it works for providers:
Families use DCAP funds to pay for your services
Providers receive payments directly from families
Must provide receipts or invoices for services rendered
Benefits to providers:
Increased demand for child care services
More stable and consistent payments from families
Families can afford higher-quality care with tax savings
Program details:
Annual contribution limit: $5,000 per family (2025)
Contributions are made pre-tax, reducing families' taxable income
Typically offered through employers as a workplace benefit
Provider requirements:
Must comply with state licensing requirements
Need to provide documentation for family reimbursements
Public-Private Partnerships
Several innovative partnerships between businesses, government agencies, and community organizations provide funding opportunities for child care providers:
Employer-Provided Child Care Credit (45F): Federal tax credit allowing employers to claim up to $150,000 annually (25% of qualified child care expenditures plus 10% of resource and referral services)
Covers costs of providing on-site facilities, operating expenses, or contracting with local providers
Business must spend at least $600,000 on child care expenses to receive full credit
Helps increase child care availability in communities
Corporate Sponsorship Programs:
Consider partnering with your local Resource & Referral (R&R) agency to connect with corporate sponsors, as R&Rs often have established relationships with businesses
Some R&Rs may be able to share contacts or provide guidance on approaching local businesses interested in supporting child care
Chamber of Commerce Initiatives:
Los Angeles Area Chamber's "Cradle to Career" initiative advocates for quality early education as part of a comprehensive approach to workforce development
Local chambers host networking events where child care businesses can connect with city officials and potential partners
Chamber advocacy can lead to policy changes that advance affordable child care as a critical economic issue
Alternative Child Care Models and Initiatives
Parent Cooperative Models:
Over 225 parent cooperatives operate in California as nonprofit, parent-governed child care centers
Parents participate in governance, maintenance, and sometimes teaching alongside professional staff
Benefits include cost savings, community building, and often better working conditions for staff
The California Council of Parent Participation Nursery Schools (CCPPNS) provides resources, networking, and sometimes grants/loans to member schools
Public-Private Partnerships:
First 5 California's Raise CA Strong campaign engages businesses to increase affordable child care access and could potentially grow California's economy by $60 billion
Action Steps
Assess your specific funding needs with a detailed budget and business plan
Contact your local Resource & Referral agency to identify regional funding opportunities
Prepare essential documentation:
Business plan with financial projections
Child care licensing documentation
Personal financial statements
Tax returns
Schedule a consultation with a Small Business Development Center or Women's Business Centers advisor who specializes in child care businesses
Create a funding strategy that combines multiple sources for maximum stability
Additional Resources
Last updated: March 2025. Information subject to change. Contact funding sources directly for the most current requirements and availability.