DealFlow OS
Get started free
Deal Structure Guide · Memory Care Facility

How Memory Care Facility Deals Are Actually Structured

From SBA-financed asset purchases to PropCo/OpCo splits with REITs, here is how buyers and sellers structure memory care acquisitions in the $1M–$5M revenue range — and what each approach means for licensing, cash flow, and risk.

Acquiring a licensed memory care facility involves more structural complexity than a typical small business purchase. State licensing continuity, Medicaid provider agreements, real estate ownership, and the vulnerability of the resident population all shape how deals are put together. In the lower middle market — facilities generating $1M–$5M in annual revenue with 10–60 licensed beds — three primary structures dominate: asset purchases with SBA financing and seller carry, asset purchases paired with a real estate sale or leaseback, and stock purchases used specifically to preserve existing licenses and payer contracts. Each structure carries meaningful trade-offs around regulatory risk, financing availability, and the speed at which a new owner can begin operating. Understanding which structure fits your specific situation — whether you are a first-time healthcare buyer using SBA capital or a regional operator adding a second site — is the foundation of a successful acquisition.

Find Memory Care Facility Businesses For Sale

Asset Purchase with SBA 7(a) Financing and Seller Carry

The buyer acquires the business assets — including equipment, resident contracts, trade name, and operational goodwill — while the real estate is either included in the SBA loan or handled separately. The SBA 7(a) loan covers the majority of the purchase price, with the seller carrying back 10–15% of the total in a subordinated note. This is the most common structure for individual buyers, clinical operators, and first-time acquirers of single-site memory care facilities.

65–75% SBA 7(a) loan, 10–20% buyer equity, 10–15% seller carry note

Pros

  • Maximizes buyer leverage with SBA 7(a) loans up to $5M, requiring as little as 10% down on eligible memory care acquisitions
  • Seller carry signals seller confidence in the business and aligns incentives during the transition period
  • Allows real estate to be included in the same SBA loan, consolidating financing and simplifying closing

Cons

  • SBA underwriting scrutinizes state survey history, occupancy trends, and payer mix — facilities with recent deficiencies or Medicaid-heavy revenue may not qualify
  • Licensing must be transferred or reapplied for in most states, creating a gap period that requires careful regulatory planning
  • Seller carry subordination requirements under SBA rules restrict how quickly the seller note can be repaid

Best for: Individual buyers, nurse practitioners, physicians, or clinical operators acquiring a first memory care facility with stable occupancy, a clean survey history, and strong private-pay census using SBA financing.

Asset Purchase with Real Estate Sold Separately via Sale-Leaseback

The buyer acquires the operating business and licenses while a real estate investor or REIT simultaneously purchases the physical facility and leases it back to the new operator under a long-term NNN lease. This structure separates the operating company (OpCo) from the property company (PropCo), unlocking real estate capital for the seller while reducing the buyer's total acquisition cost and entry capital requirement.

50–60% SBA or conventional loan on OpCo, 10–15% buyer equity, 10–15% seller carry, real estate sold to REIT or investor at 6–8% cap rate

Pros

  • Reduces buyer's required capital by removing real estate from the acquisition, focusing SBA or conventional financing on the operating business only
  • Allows the seller to monetize real estate separately, often at a premium to what an integrated sale would yield
  • Long-term NNN lease with renewal options provides operational stability and predictable occupancy cost for the buyer

Cons

  • Ongoing lease obligations create fixed costs that compress operating margins, particularly if census dips below 80% occupancy
  • REIT or real estate investor lease terms may include escalators, restrictions on subletting, or change-of-control provisions that complicate future resale
  • Coordinating two simultaneous closings — the business sale and the real estate sale — adds legal and logistical complexity

Best for: Regional operators or private equity-backed platforms with existing real estate relationships or REIT partners, or sellers who want to maximize total proceeds by separating real estate value from operating business value.

Stock Purchase to Preserve State License and Medicaid Provider Agreements

The buyer acquires the legal entity that holds the state operating license, Medicaid certification, and resident agreements rather than purchasing individual assets. No new license application is triggered because the entity — and its regulatory history — transfers intact. This structure is used specifically when a license transfer would cause an unacceptable gap in operations or when Medicaid census is significant enough that losing provider status would materially harm the business.

70–80% conventional or SBA financing, 10–15% buyer equity, 10–15% seller carry, representations and warranties insurance at 1–3% of deal value

Pros

  • Preserves existing state memory care operating license and Medicaid provider number without triggering a new application or survey
  • Eliminates the operational gap risk that comes with asset purchase license retransfers, protecting census continuity during ownership change
  • Can accelerate closing timeline when regulatory approval of a new license would take 90–180 days or longer

Cons

  • Buyer assumes all historical liabilities of the entity, including undisclosed regulatory violations, employment claims, and resident litigation — requiring robust representations and warranties insurance
  • Lenders, including SBA, are more cautious with stock purchases and may require additional due diligence or structure modifications
  • Sellers may face different tax treatment under stock sale versus asset sale, creating negotiation friction around price and terms

Best for: Experienced senior care operators or regional platforms acquiring facilities with meaningful Medicaid census, complex license histories, or markets where new license approval timelines would threaten occupancy and revenue continuity.

Sample Deal Structures

First-Time Buyer Acquiring a 24-Bed Private-Pay Memory Care Facility with Real Estate Included

$2,800,000

SBA 7(a) loan: $2,240,000 (80%) covering goodwill, equipment, and real estate; Buyer equity injection: $280,000 (10%); Seller carry note: $280,000 (10%) subordinated, interest-only for 24 months then fully amortizing

SBA loan at WSJ Prime + 2.75%, 25-year amortization on real estate portion, 10-year on business assets; seller carry at 6% interest, 5-year term, standby during SBA loan period; seller remains as paid consultant for 90 days post-close to support licensing transition and staff retention

Regional Operator Acquiring a 40-Bed Facility via PropCo/OpCo Split with Sale-Leaseback

$4,200,000 total ($2,600,000 operating business + $1,600,000 real estate sold to REIT)

SBA 7(a) loan on OpCo: $1,820,000 (70% of $2,600,000); Buyer equity: $390,000 (15%); Seller carry on OpCo: $390,000 (15%); Real estate: $1,600,000 purchased by net lease REIT at 6.5% cap rate, NNN lease back to operator at $104,000 annually

15-year NNN lease with two 5-year renewal options and 2.5% annual rent escalator; SBA loan at 10-year term on business assets; seller carry at 5.5% over 5 years; buyer assumes management of existing administrator and care team with 12-month employment agreements

Stock Purchase by PE-Backed Platform to Preserve Medicaid Provider Agreement in Certificate-of-Need State

$3,500,000

Conventional senior debt: $2,450,000 (70%); PE equity: $700,000 (20%); Seller rollover equity or carry: $350,000 (10%); Representations and warranties insurance premium: approximately $63,000 (1.8% of deal value) covering 3-year survival period

Stock purchase agreement with 18-month escrow holdback of $175,000 for undisclosed liabilities; seller representations covering survey history, staffing compliance, and Medicaid billing accuracy for 5-year lookback; Medicaid provider agreement and state license confirmed to transfer without re-enrollment; seller-operator retained as administrator for 6 months at market salary

Negotiation Tips for Memory Care Facility Deals

  • 1Tie seller carry terms to post-close census performance — structure the note so that if occupancy drops below 78% for two consecutive quarters, the seller carry payment is deferred, aligning the seller's financial incentive with operational continuity after transition.
  • 2Push for a 12-to-24-month trailing EBITDA calculation that excludes non-recurring expenses such as one-time legal costs from resolved survey deficiencies or extraordinary staffing agency fees, ensuring the valuation reflects normalized operations rather than anomalous cost periods.
  • 3Negotiate a real estate appraisal contingency in addition to the standard financing contingency — if the property appraises below the allocated real estate value in an SBA deal, you need the contractual right to renegotiate the purchase price allocation before closing.
  • 4Request a staffing certification from the seller at closing confirming that all care staff meet state-required dementia care certification levels and that no positions required by state minimum staffing ratios are currently vacant, protecting you from immediate post-close compliance exposure.
  • 5In stock purchases, require a comprehensive Medicare and Medicaid billing audit covering at least 36 months prior to closing — memory care Medicaid billing errors can result in recoupment demands that arrive 12 to 18 months post-acquisition and are not always captured in representations and warranties insurance.
  • 6If the seller is the licensed administrator of record, negotiate a minimum 90-day transition period with a licensed replacement administrator identified and introduced to state regulators before closing — most states require notification of administrator changes and some require approval, making this a potential deal-stopping regulatory issue if not addressed early.

Find Memory Care Facility Businesses For Sale

Pre-screened targets ready for your deal structure — free to join.

Get Deal Flow

Frequently Asked Questions

Why do most memory care facility acquisitions use an asset purchase rather than a stock purchase?

Asset purchases are preferred in most memory care deals because they allow the buyer to acquire only the assets and operations without assuming the legal entity's historical liabilities — including past regulatory violations, employment disputes, or undisclosed Medicaid billing errors. The trade-off is that the state operating license and, in some cases, Medicaid provider agreements must be retransferred or reapplied for, which can take 60–180 days depending on the state. Stock purchases are reserved for situations where license continuity or Medicaid enrollment preservation is so critical to census that the liability assumption risk is worth managing through representations and warranties insurance and escrow holdbacks.

Is SBA financing available for memory care facility acquisitions, and what do underwriters look for?

Yes, memory care facilities are SBA 7(a) eligible, and many deals in the $1M–$5M revenue range are financed with SBA loans covering up to 90% of the total project cost when real estate is included. SBA lenders underwriting memory care deals focus heavily on census stability and occupancy trends over the trailing 24 months, payer mix with preference for 50%+ private pay, clean state survey history with no unresolved Class A deficiencies, and the viability of the management team without the seller. Facilities with Medicaid as their dominant payer, pending sanctions, or no identified post-sale administrator often struggle to clear SBA underwriting.

How does the PropCo/OpCo structure work in a memory care acquisition, and when does it make sense?

In a PropCo/OpCo structure, the physical facility is sold to a real estate investor or REIT while the buyer acquires only the operating business and licenses. The real estate investor leases the building back to the operator under a long-term NNN lease. This structure makes sense when the real estate represents a significant portion of total deal value and the buyer wants to reduce their capital requirement, or when the seller wants to maximize total proceeds by monetizing real estate at a cap rate-based valuation separate from the business multiple. The risk for buyers is that ongoing lease payments create fixed costs regardless of occupancy, so buyers should model downside scenarios at 70% census before committing to lease terms.

What is a reasonable seller carry percentage for a memory care facility deal?

Seller carry in memory care acquisitions typically runs between 10% and 15% of the total purchase price. SBA lenders generally require seller notes to be on full standby — meaning no principal or interest payments — for the first two years of the SBA loan. After the standby period, seller notes typically carry interest rates between 5% and 7% with 5-to-7-year terms. Larger carry amounts (above 15%) are sometimes negotiated when the business has characteristics that introduce buyer risk — such as a seller who is the sole administrator of record, a facility with a recent survey citation that is resolved but still visible, or a payer mix that skews toward Medicaid.

What happens to the state memory care license during an asset purchase closing?

In an asset purchase, the state operating license does not automatically transfer to the buyer. Most states require the buyer to apply for a new license or formal change-of-ownership approval, which can take anywhere from 30 days to 6 months depending on the state. During this gap, the seller typically continues to operate under their existing license under an interim management or operating agreement, with the buyer managing day-to-day operations but the seller remaining the licensed operator of record. Buyers should confirm the specific change-of-ownership process with their state's health department before signing a purchase agreement and build realistic timelines — including regulatory approval milestones — into the closing schedule.

How is the purchase price allocated in a memory care facility asset purchase, and why does it matter?

Purchase price allocation in a memory care asset purchase is negotiated between buyer and seller and reported to the IRS on Form 8594. Common allocation categories include tangible assets such as furniture, equipment, and vehicles (depreciated quickly and favorable to buyers), real estate if included (depreciated over 39 years), and intangible assets such as goodwill, assembled workforce, and resident relationships (amortized over 15 years). Sellers generally prefer more allocation to goodwill and real estate to achieve capital gains treatment; buyers prefer allocation to tangible assets and equipment for faster depreciation. The allocation also affects future resale value — high goodwill allocations relative to tangible assets can complicate future SBA financing for the next buyer, which is worth considering as part of exit planning.

More Memory Care Facility Guides

Acquire a Memory Care Facility Business →Valuation Guide →SBA Loan Guide →LOI Template →Due Diligence →

More Deal Structure Guides

Mental Health Private Practice →Mexican Restaurant →Microblading & PMU Studio →Mobile Car Detailing →Mobile Veterinary Services →Mold Remediation →Montessori School →Mortgage Brokerage →Browse all deal structure guides →

Start Finding Memory Care Facility Deals Today — Free to Join

Find the right target, structure the deal, and close with confidence.

Create your free account

No credit card required

For Buyers

For Sellers

Free Tools

Platform

DealFlow OS
© 2026 DealFlow OSPrivacy PolicyTerms of Service