Arkansas couple says daycare business purchase left them in financial ruin

BELLA VISTA, Ark. — What started as a dream turned into what one Northwest Arkansas couple called a financial nightmare.

Brittany and Larry McDaniel said buying a daycare business in Centerton left them with half a million dollars in debt and nowhere left to turn for help.

The couple moved to Northwest Arkansas with the hope of creating a new kind of learning environment for children.

“I wanted it to be education-based and solely for the children to have a preschool atmosphere, but also a lot of fun and hands-on sensory type activities,” Brittany said.

They purchased the daycare in 2023 with the help of a business broker. 

“They gave us all the financials and everything, so we reviewed all of that, and it looked like a dream come true. It said that they were profiting a lot per year, and we’re like, ‘Well, we have a lot we can reinvest into this,’” Brittany said.

Larry added, “We looked at all the numbers really closely and said, ‘Even with borrowing money and doing the SBA loan, we’re still going to make a certain amount.’”

But just a few months into owning the daycare, the McDaniels say the numbers stopped adding up.

“We had about the same number of children enrolled. We were operating basically the same ways. We had even made cutbacks on food and things like that, for the kitchen items, things that we could cut back, we did, and we still were not making ends meet,” Brittany said.

While reviewing the financials late one night, Brittany said she discovered financial records on a computer left behind at the daycare that showed nearly $100,000 in COVID-19 relief grants had been counted as regular revenue, not temporary aid, making the business appear healthier than it really was.

Brittany said they turned over those records to the bank.

“We went back and forth with the bank, and they said, ‘Unfortunately, you’re just in a tight spot. There’s really nothing that we could do,’” Brittany said.

The couple says they poured tens of thousands of dollars of their own savings into the business trying to keep it afloat.

“It was a struggle from one month to the next, and we just couldn’t make it in the end,” Larry said.

The daycare eventually closed. The McDaniels filed for bankruptcy, but because their SBA loan was personally guaranteed, they remained responsible for repayment even after shutting down.

They say they’ve filed complaints with law enforcement, federal agencies, and regulators, but no one has taken their case.

“At this point, there’s no one that can hold or that’s willing to hold them accountable, and we’re out of funds to be able to do so,” Larry said.

“I just would like to see someone take a look at our case and tell me, why are we being held responsible for someone else’s crime?” Brittany added.

The FBI did investigate and passed the case to the U.S. Attorney’s Office for the Western District of Arkansas. A spokesperson said after reviewing the situation, the office determined the matter was better handled as a civil case.

The McDaniels say they initially tried to pursue the sellers in civil court, but bankruptcy has left them financially unable to continue.

A legal expert at the University of Arkansas says situations like this highlight why it’s critical to have an attorney involved before signing a business deal. Attorneys can verify that financial claims are accurate, ensure promises are spelled out in writing, structure payments to prevent overpaying, and help protect personal assets such as homes and savings.

The McDaniels say they want to see stronger protections for small business buyers and an agency that can step in when fraud is suspected.

“It’s just been a nightmare, the whole process,” Larry said.

“To other potential small business buyers, Brittany emphasized the importance of asking detailed questions: “Make sure that you check the financials and ask about any grants or any potential ‘not traditional’ revenue … how they would receive it, and make sure that all of the revenue that they receive is something that’s going to happen year after year.”

5NEWS has reached out to the seller of the daycare multiple times with no response.