Infants who receive high-quality child care and early education programs do better in school, have more developed social skills, and display fewer behavioral problems. Childcare can also help mothers get back to their careers, and it helps in the overall financial management of the household. But the issue is that there has been no lender targeting childcare expenses. In an era where a TV can be bought on installments, it is amazing that somebody has missed targeting the $21 billion childcare industry. More importantly, the ROI is very easy to calculate for investment in childcare. Analysis shows that a mother dropping out of the workforce for just five years would lose over $1 million in lifetime earnings. For every single dollar invested in childcare, the household benefits by $12. BridgeCare Finance, a Seattle based alternative lender, is focused on solving this massive pain point for millions of young mothers. It is a consumer-lending platform offering childcare financing to reduce monthly childcare payments for professional parents. It provides consumer loans, which function similar to lines of credit for families burdened with high childcare costs.
How BridgeCare Works
BridgeCare provides a new loan product specifically for financing childcare and preschool fees. Their goal is to help parents provide the best quality care to their children by breaking the cost barriers. If parents are unable to afford the whole payment, BridgeCare gives them an option to pay in installments. The company has structured a flexible payment plan where parents can pay the childcare amount over a longer duration. For instance, instead of paying $800 per month for three years of childcare, BridgeCare gives the option of paying $400 per month for an additional five years or paying $480 per month for additional three years. This reduces the immediate cashflow burden and stretches the payment of childcare over a longer tenure.
Applying for a BridgeCare plan is simple and intuitive. To register, the customer visits BridgeCare’s website and completes the application form. Once submitted, it gets approval within 24 hours. After approval, the customer makes a partial payment to BridgeCare, and BridgeCare further makes the full payment to the childcare provider.
The company partners with childcare service providers and kindergarten players, onboarding them as associates. It’s a win-win relationship as the startup gets access to potential borrowers and providers don’t lose out on revenue just because parents couldn’t afford their services. The discussion for a loan option starts between the center and the parent as soon as a prospective child enters the center.
The company presently does not have a technology integration with the service providers, but they are looking to create API’s in the long run. Currently, BridgeCare have direct access to the borrower, which is helpful as it allows them to control the message, positioning, and pricing of the service.
The company is on a manual approval system but will soon transition into an automated system of credit decisioning. Its innovation is in product design and capturing an underserved market. The team is working hard to make sure the technology catches up to the business model.
BridgeCare has created a credit grid for approvals. Based on multiple factors like risk profile, tenure, and terms, the grid helps the company make an offer for minimum payment and other conditions for the loan facility.
The company has divided its target demographics into three tiers.
- The Lower Tier includes people in professional jobs (i.e. doctors, lawyers, etc.) who are highly educated and earning around $75,000 to $120,000. As they are in the early stage of their careers, they have competing needs for home savings and childcare.
- The Upper Tier comprises people with stable jobs and good earnings (i.e. around $100,000 to $175,000) and has less probability of default.
- The Third Tier includes rural areas that usually have borrowers with low income and high childcare costs as a percentage of income. In this category, the risk is comparatively higher than the other two categories.
BridgeCare also has the flexibility to follow the child to another child care provider and make arrangements with the new child care provider for the payment plan.
The founders believe there is no tangible competition in its niche. There are a couple of state government programs which provide subsidized installment loans to low-income families, but that is the extent of the competition.
Audra Jung and Jamee Herbert launched BridgeCare Finance in October 2016. Jung has a background in public funding while Herbert’s background is in women’s advocacy. They understand the issues at hand for young working mothers. Jonathan Kirst joined as a cofounder and is the CTO of the company. He was previously CTO at Roostify, a digital lending platform focused on mortgages.
Jung and Herbert were MBA classmates at Presidio Graduation School in Seattle. It was here they got the inspiration and the knowledge about the childcare and the finance industry. They developed the business idea in their MBA entrepreneurship class.
BridgeCare has raised a total of $200,000 from family, friends, and angel investors. The funding was vital for their working capital needs, getting licensed, for building out the product design and to meet legal requirements. They are currently registered to operate in Washington and looking to raise further funding for a national roll out.
BridgeCare is planning to enter into partnerships with early learning and the childcare industry for expansion. It is also looking to onboard associates who can help the company raise cheaper capital and/or expand to different states.
According to ChildCare Aware of America, in 2015, in 24 states, the cost of center-based child care exceeded housing costs for families with a mortgage. In 30 states, a year of center-based infant care was more expensive than a year of public university. BridgeCare has hit on an underserved multi-billion dollar niche. Its ability to expand aggressively would be important for it to capture the childcare financing segment.
Written by Heena Dhir.