From SBA-backed asset purchases to PropCo/OpCo splits and occupancy-based earnouts — here's how deals actually get done in the lower middle market senior care space.
Acquiring or selling an assisted living facility involves layering together operational goodwill, physical real estate, state licensing requirements, and resident care continuity in a way that few other small business transactions require. Most deals in the $1M–$5M revenue range involve some combination of SBA 7(a) financing, seller participation through a note or earnout, and a deliberate decision about whether real estate moves with the operating business or is separated into its own structure. The right deal structure protects both parties: buyers need to manage cash flow risk during the licensing transfer period, and sellers need confidence that they will actually get paid — especially if occupancy softens post-close. This guide walks through the three most common structures for assisted living deals, provides real-world scenario examples, and offers negotiation tactics specific to licensed care businesses.
Find Assisted Living Facility Businesses For SaleAsset Purchase with SBA 7(a) Financing
The buyer acquires the business assets — including the operating license (subject to state approval), resident contracts, equipment, and goodwill — rather than the legal entity. SBA 7(a) financing covers the acquisition price net of the down payment, with the real estate either leased from the seller or purchased separately. This is the most common structure for first-time buyers of assisted living facilities under $5M in revenue.
Pros
Cons
Best for: First-time buyers or regional operators acquiring a single facility where the seller's entity has no clean record advantage and real estate is leased rather than owned.
Stock or Entity Purchase with Seller Financing and Earnout
The buyer acquires the existing legal entity — typically an LLC or corporation — that holds the facility license, resident agreements, and operating history. The seller carries a portion of the purchase price as a promissory note, and an earnout component ties a portion of the final consideration to post-close occupancy performance. This structure is often preferred when the license transfer process is burdensome or when occupancy risk is a key negotiating point.
Pros
Cons
Best for: Experienced healthcare operators or regional consolidators acquiring a facility with a clean, established license where preserving the existing regulatory standing is more valuable than the liability protection of an asset purchase.
PropCo/OpCo Structure with Seller-Retained Real Estate
The real estate and the operating business are separated at close. The seller retains ownership of the building and land (PropCo) and leases it to the buyer under a long-term net lease. The buyer acquires only the operating business (OpCo) — goodwill, license, staffing, and resident relationships — at a lower purchase price. This structure is common when sellers want to retain real estate as a retirement income asset or when the combined real estate plus business price exceeds SBA lending limits.
Pros
Cons
Best for: Retiring owner-operators who own their building and want to generate ongoing passive income from a triple-net lease while transferring operational responsibility to a qualified buyer.
SBA Asset Purchase — 20-Bed Facility, Leased Building
$1,800,000
SBA 7(a) loan: $1,530,000 (85%) | Buyer equity/down payment: $270,000 (15%) | Seller note: $0 (clean asset sale, no seller carry required by lender)
10-year SBA loan at prime + 2.75%, fully amortizing. Lease assignment from seller to buyer at $12,000/month with 5-year initial term and two 5-year renewal options. License transfer application filed simultaneously with LOI; close conditioned on state approval of new ownership or interim management agreement. Seller provides 60-day post-close transition support.
Entity Purchase with Seller Note and Occupancy Earnout — 35-Bed Memory Care Facility
$3,200,000 base + up to $300,000 earnout
SBA 7(a) loan: $2,400,000 (75%) | Buyer equity: $480,000 (15%) | Seller promissory note: $320,000 (10%) at 6% over 5 years | Earnout: up to $300,000 paid over 24 months based on average occupancy thresholds
Earnout structured in two tranches: $150,000 paid at month 12 if trailing 6-month average occupancy exceeds 88%, and $150,000 paid at month 24 if trailing 12-month average occupancy exceeds 90%. Seller note is subordinate to SBA debt and includes a 12-month standby period per SBA guidelines. Entity purchase includes full reps and warranties package with 12-month survival period and $200,000 indemnification basket.
PropCo/OpCo — Retiring Owner Sells Operations, Retains Building
$2,100,000 for OpCo (business only)
SBA 7(a) loan: $1,680,000 (80%) | Buyer equity: $420,000 (20%) | Seller note: $0 | Real estate retained by seller and leased to buyer at $14,500/month NNN
15-year triple-net lease with two 10-year renewal options and annual CPI escalator capped at 3%. Buyer has right of first refusal to purchase real estate at appraised value if seller elects to sell. OpCo purchase price reflects lease-adjusted SDE of $380,000 at a 5.5x multiple. Seller agrees to 90-day operational transition and introductions to all resident families, key staff, and state licensing contacts.
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Yes. Assisted living facilities are SBA 7(a) eligible businesses, and SBA financing is one of the most common funding sources for lower middle market care home acquisitions. Lenders will underwrite the loan against the facility's stabilized cash flow, occupancy history, and payer mix. Most lenders want to see 80%+ occupancy, at least 2–3 years of operating history, and a clean licensing record. If the deal includes real estate, SBA 504 loans can be used alongside a 7(a) structure to separate the real property financing from the business acquisition.
This is one of the most critical — and most misunderstood — aspects of assisted living acquisitions. Licensing is governed at the state level, and each state has its own process for ownership transfers. In most states, a change of ownership (CHOW) requires the buyer to submit a new license application, undergo background checks, and demonstrate financial capacity. Until the new license is approved, the buyer legally cannot operate the facility under their own name. This is why most deals include an interim management agreement allowing the buyer to manage operations under the seller's existing license while the new application is processed. Factor in 60–120 days for this process in most jurisdictions.
Occupancy risk — the possibility that census drops between signing and close, or in the months following close — is typically addressed through one or more of three mechanisms. First, a seller earnout tied to post-close occupancy metrics shifts some risk back to the seller if census declines. Second, buyers negotiate a price adjustment mechanism if occupancy drops below a defined threshold (e.g., below 80%) between the LOI date and closing. Third, buyers may negotiate a seller note with a delayed repayment start to preserve cash flow if occupancy is softer than modeled in the first year. The right tool depends on how much uncertainty exists in the occupancy data at the time of negotiation.
This depends on your capital availability, investment strategy, and the seller's preferences. Buying the real estate together with the business creates a dual-asset investment — you own both the cash-flowing operation and the appreciating property — but it significantly increases the total acquisition cost and debt load. Separating them through a PropCo/OpCo structure lowers the OpCo purchase price and may make SBA financing easier to obtain, but exposes you to future rent increases and lease renewal risk. If you have the capital and the real estate is well-maintained with no deferred issues, buying both together is generally the stronger long-term equity position. If capital is constrained, the PropCo/OpCo structure with a purchase option is a reasonable alternative.
Most sellers in the $1M–$5M revenue range are asked to carry 10–20% of the purchase price as a seller note, particularly in entity purchase structures. SBA lenders typically require seller notes to be on full standby for the first 24 months of the loan term, meaning the seller cannot receive principal or interest payments during that window. Sellers who understand the market and want to close deals generally accept this condition. In exchange, the seller note is typically priced at 6–8% interest over a 5–7 year term, which is attractive relative to most investment alternatives available to a retiring owner-operator. Sellers who refuse any financing participation often face a smaller buyer pool and longer time to close.
Most assisted living deals in the lower middle market take 4–9 months from signed LOI to close, with the licensing transfer process being the primary variable. SBA loan approval typically takes 45–75 days once a complete application is submitted. State licensing applications for new ownership run 60–120 days in most jurisdictions, though some states take longer. Deals that run in parallel — submitting the SBA application and the state licensing application simultaneously after LOI signing — tend to close faster. Sellers and buyers who have not budgeted time and carrying costs for this timeline are often caught off guard, which is why working with a broker or advisor experienced in healthcare business transfers is strongly recommended.
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