I think it deters a few parents, but definitely not all or most. Having a main floor daycare space is a selling point for some, but if your basement is finished, safe, and has windows large enough for getting out in an emergency, that's what is most important, to many people. I have 2 daycare playrooms in my basement (with windows large enough for emergency exit), and I have them decorated brightly, with berber carpet on one of the floors and laminate on the other. The basement is finished nicely with permanent ceilings etc. I've gotten a lot of compliments on my set up from parents. Mind you, we spend time on the main floor as well, with meals/snacks and crafts at the dining room table, and we also spend as much time as possible outside, so there's no lack of sunshine in their day.