Finance Your Residential Care Home Acquisition with an SBA Loan

Begin by sourcing residential care homes with stable occupancy above 80%, clean state inspection histories, and at least 2 years of CPA-prepared financials. Confirm the facility is licensed in good standing with the state health department (no probationary status or pending citations), operating under a recognized NAICS code (typically 623990 or 623312), and generating EBITDA margins of 15–30%. Verify that the owner is not serving as the sole administrator or primary caregiver — SBA lenders will require the business to operate without the seller post-close.

Negotiate and execute a non-binding Letter of Intent (LOI) outlining purchase price, deal structure, due diligence period, and exclusivity window. Request 3 years of tax returns, P&L statements, resident census records, payer mix breakdowns (Medicaid vs. private pay), and any state inspection reports or deficiency correction documents. For care homes, also request staff rosters with credentials, the facility lease or property deed, and copies of all current Medicaid waiver contracts and referral agreements.

Select an SBA Preferred Lender Program (PLP) lender with demonstrated experience financing residential care home or assisted living acquisitions. Avoid general commercial lenders unfamiliar with care home regulatory structures — they will often misunderstand the licensing transfer process or require unnecessary conditions. Prepare a complete loan package including your personal financial statement, resume demonstrating healthcare or operational experience, business plan, and the target business's financials. Lenders will order a third-party business valuation and, if real estate is included, a commercial property appraisal.

Conduct thorough due diligence covering five critical areas: (1) State licensing status — pull inspection history directly from the state health department portal and verify no outstanding deficiencies or complaints; (2) Payer mix — analyze Medicaid reimbursement rates by waiver type and identify any upcoming rate changes; (3) Staff credentials — verify all caregiver certifications, administrator licensing, and turnover rates over the past 24 months; (4) Census stability — review resident intake and discharge records, average length of stay, and any beds held under Medicaid contracts; (5) Property condition — assess physical plant for ADA compliance, fire safety, and any deferred maintenance that could trigger citation. Engage a healthcare attorney to review all regulatory, lease, and resident agreement documents.

Once the lender issues a conditional commitment or approval letter, work to satisfy all pre-closing conditions. These typically include evidence of hazard and liability insurance naming the lender, confirmation of licensing transfer application submission (or state approval where required pre-close), lease assignment consent from the landlord (if applicable), and a signed seller note subordination agreement if a seller carry is included in the deal structure. Some states require new owner licensing approval before a care home transaction can legally close — build this timeline into your deal structure early.

At closing, the SBA loan funds are disbursed, the asset purchase agreement is executed, and ownership transfers. Immediately initiate the formal state licensing transfer process in your name or entity. Introduce yourself to existing staff, residents, and families — census stability post-close is critical for debt service, and any disruption can trigger move-outs. If a seller note is part of the structure, ensure the seller remains available for a 30–90 day transition period to support regulatory continuity, staff retention, and family relationship handoffs. Notify all referral sources, hospital discharge planners, and Medicaid case managers of the ownership change.