SBA 504, SBA 7a & HUD Loans for Assisted Living Facilities, Senior Care, Skilled Nursing, Retirement & Nursing Homes, Memory Care, Adult Day Care and Independent Living*
SBA & HUD insured mortgages can be used for the refinance, acquisition or construction of licensed Senior Care and Special Use facilities including:
- Assisted Living Facilities
- Independent Living
- Board and Care Homes
- Nursing Homes
- Psychiatric Facilities
- Alzheimer’s Facilities
- Disability Care
- Skilled Care
- Intermediate Care Nursing
- Personal Care Nursing Facilities
- Drug and Alcohol Centers
- Rehab Hospitals
- Sheltered Care
- other “special purpose facilities
*Limited Independent Living units may be allowed subject to conditions
Assisted Living Facility Construction Financing
SBA loans (in particular the 7a program) are the path of least resistance when it comes to assisted living construction financing.
You need just 10% down and lenders are generally flexible as far as what type of facility they will finance, level of experience for borrowers, credit scores, etc.
FHA/HUD Section 232 Loans
The following types of HUD LEAN financing are available for Senior Housing/Assisted Living:
- Refinance of existing HUD/FHA insured loans
- New Construction or Rehabilitation
FHA/HUD Section 242 Loans
FHA/HUD Second Mortgages or “supplemental loans” are available for FHA Insured Properties.
Bridge to Hud
Bridge loans for projects not yet eligible for HUD financing – a.k.a. “Bridge to HUD financing” – are available at very attractive rates – please call us for details: 1-800-414-5285
Fannie Mae and Freddie Mac
Fannie Mae Senior Housing Financing and Freddie Mac Senior Housing Loans are also available.
HUD 232 Acquisition and 223(f) for Refinancing current HUD loans:
- Up to 35 year loan term and amortization
- Lowest possible interest rates for ALF financing
- Loan is Non Recourse
- Loan is Fully Assumable
- Interest rate is fixed for length and term of loan – NO balloon
- Ownership may be for profit or non profit
- Prepayment penalty typically 2 to 3 year lockout and declining penalty through Year 10
- No CASH OUT and existing debt must be seasoned 2 years
Maximum FHA insured mortgage limited to the lesser of:
- a mortgage supported by a 1.35 debt service coverage ratio
- 80% of appraised value for “for profit” entities
- 85% of appraised value for “non-profit” entities
- 100% of existing debt including loan costs, repairs and replacement reserves
HUD Construction Loans
HUD lenders are actively offering construction financing for strong projects.
HUD Construction Financing Highlights:
- Interest only through construction period
- 40 year loan term and amortization
- Interest rate fixed for term of loan
- No maximum loan amount
- Loan to hard and soft costs is 90%
- Loan is non-recourse, even through construction
- Loan is assumable
- Prepayment is normally: Closed for 5 years, then 5% first year declining 1% per year to par
- Ownership may be for profit or non profit
HUD 232 and 223f Costs
Please note that both the HUD 232 and 223(f) programs have significant up front costs although most can be financed into the loan. Here is sampling of typical fees:
- Appraisal: $6 – 8,000
- Environmental: $2500 to $5,000
- Engineering Report: approx $3,500
- MAPS underwriting: approx $7,500
- HUD fee: 3/10ths of 1 percent
MAPS stands for Multifamily Accelerated Processor Services. HUD MAP lenders are designated by HUD for healthcare underwriting.
Residential Care Facilities a.k.a. RCFE’s, Residential Board and Care Home Financing
Residential Board and Care homes can be financed for up to 25 years with as little as 10% down. Please contact us for more information.
SBA Assisted Living Facility Financing
The SBA 504 program as well as the 7a are well suited for Assisted Living Facility financing or refinancing,* but they are they are typically used for smaller projects – for instance, for the financing of Residential Board and Care homes or RCFE’s (Residential Care Facilities for the Elderly) . The 7a loan program in particular is an excellent way to get smaller projects (under $5 million) financed.
Click here for more info on the 7a program.
Construction can be difficult in the current market – especially for a start up, but those with a track record of owning and managing senior care facilities and who have good outside or global cash flow should have options. Expansion of an existing facility is easier than new construction.
*Debt refinances were available through September 2012 and debt refis with a business expansion are still possible.. Please visit our 504 refinance page for up to date information.
Higher Total Project Costs with the SBA Green 504
The HUD programs can handle much larger projects than an SBA loan, but recent changes to the 504 loan program allow larger loan amounts than ever before through the 504 program. 504 loans are now available for projects upwards of $12,000,000 (especially if you go green).
To qualify for maximum financing you must produce enough of your own energy to significantly impact your energy usage and costs. This new version of the 504 – the green 504 loan – is an excellent tool for anyone looking to finance a senior care facility with long term, attractive commercial financing.
By going green you will be helping the environment and possibly significantly lowering your long term energy and operating costs and you will be doing it with the least possible out of pocket expense.
Commercial Financing with 15 to 20% Down
The 504 requires 15 to 20% down at a time when most banks and lenders are looking for 30% or more down. The amount of down payment is dependent on your level of experience in the senior housing industry.
The program is ideal for smaller, locally owned senior housing facilities, since it requires that the owner be “hands on.”
USDA B & I
The USDA Business and Industry (or B & I) program is also a good solution for Assisted Living and Senior Care facilities in rural and semi-rural areas. Please contact us for more details.
Conventional Financing for Assisted Living and Senior Housing Developments
Obtaining SBA, USDA or HUD financing can take anywhere from 4 to 8 months. Conventional financing can be quicker, but is only available for very strong projects with strong sponsors and significant equity. Please contact us if you feel your project might qualify.
Financing for Non-Profit / 501(c)(3) Organizations
Senior care and senior housing financing is also available for 501(c)(3) organizations building or financing facilities.
“A Minus” SBA 504 Assisted Living Facility Financing
The 504 A- program is for refinances and acquisitions for owners who have returned to profitability after a few bad years. Please click here for more info: SBA 504 A Minus Loan.
Please contact us at 1-800-414-5285 for more information.
contact us to find out more!
More SBA 504 Loan info: 504 Loans