A structured checklist for buyers evaluating licensed memory care operations between $1M–$5M in revenue, covering regulatory compliance, census quality, staffing, and real estate.
Find Memory Care Facility Acquisition TargetsAcquiring a memory care facility requires deeper scrutiny than most lower middle market deals. Beyond standard financial review, buyers must assess state licensing status, survey deficiency history, dementia-specific staffing certifications, resident acuity levels, and physical plant safety compliance before committing capital.
Validate the facility's legal right to operate and identify any compliance risks that could disrupt licensure, trigger sanctions, or affect Medicaid provider agreements post-close.
Request current license, all state survey reports from the past five years, and any corrective action plans. Flag Class A deficiencies, immediate jeopardy citations, or pending enforcement actions.
Confirm active Medicaid certification, provider number, and enrollment status. Determine whether a stock or asset purchase is required to preserve existing agreements without re-enrollment delays.
Verify the facility holds a valid certificate of occupancy for memory care use and that local zoning permits continued residential care operations at the licensed bed count.
Evaluate revenue quality, occupancy trends, and payer mix to confirm sustainable cash flow and assess exposure to Medicaid rate risk or census volatility.
Obtain monthly census reports showing occupancy, private-pay percentage, Medicaid census, and average daily rate by payer type for the trailing 24 months. Target 50%+ private pay.
Review three years of accrual-based financials with a detailed add-back schedule. Recast owner compensation, personal expenses, and one-time costs to confirm normalized EBITDA between $300K–$1.5M.
Analyze monthly admission and discharge data to identify census stability, seasonal patterns, or accelerating move-outs that could signal care quality concerns or competitive displacement.
Assess staffing quality, resident liability exposure, and facility condition to identify hidden capital requirements and transition risks before finalizing deal structure.
Review staff schedules, dementia-care certification records, and trailing 12-month turnover data. Identify any positions relying on agency labor, which inflates costs and signals retention problems.
Review all signed care agreements, rate schedules, and any resident or family complaints, grievances, or litigation filed in the past five years, including elopement or fall incidents.
Commission an independent property inspection covering HVAC, sprinkler systems, emergency call systems, secured egress points, and dementia-specific safety features. Quantify any deferred maintenance or required capital expenditures.
Verify the Memory Care Facility acquisition qualifies for SBA financing, the purchase price is supportable by the verified cash flow, and the deal structure protects the buyer's downside.
Confirm the Memory Care Facility meets SBA 7(a) eligibility requirements: the business is for-profit, U.S.-based, within SBA size standards, and the buyer meets personal financial requirements. Some industries have specific SBA restrictions — verify before LOI.
Model verified normalized EBITDA against projected SBA loan payments at current rates. A $1M SBA 7(a) loan at 10.5% over 10 years costs approximately $13,000/month. The Memory Care Facility must generate at least 1.25x debt service coverage after a market-rate manager salary to pass underwriting.
Confirm the seller note is properly subordinated to the SBA loan and goes on 24-month standby as required by SBA rules. If an earnout is included, define exact measurement metrics, time period, and dispute resolution process before signing the purchase agreement.
Before signing a Letter of Intent, request these documents from the seller. Missing or incomplete items are a red flag — not a reason to proceed without them.
Stock purchases preserve Medicaid provider agreements and existing state licenses but carry more liability. Asset purchases are cleaner but may require re-enrollment and new license applications, causing operational delays.
Target facilities with trailing 12-month occupancy consistently above 75%, ideally 85%+. Occupancy below 70% significantly compresses margins and may indicate referral pipeline, care quality, or market positioning problems.
Yes. Memory care facilities are SBA 7(a) eligible when structured as an operating business acquisition. SBA financing can cover goodwill, equipment, and working capital, with sellers commonly carrying 10–15% to meet injection requirements.
Class B deficiencies with resolved corrective action plans have limited impact. Class A deficiencies, immediate jeopardy citations, or open enforcement actions materially reduce valuation and may make lender financing unavailable until fully resolved.
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