How to Finance an Assisted Living or Memory Care Deal in 2026
by Raises.com
This article is general information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.
An assisted living or memory care facility is an operating business inside a building, so lenders and investors underwrite the license, the staff, the census history and the operator as hard as the real estate. The debt follows who runs it. If you operate and qualify, an SBA 7(a) loan fits under its $5M cap. If not, use conventional or agency debt, with investor equity in a single-asset SPV.
Why a care facility is underwritten twice
An apartment building earns rent from leases. A care facility earns fees from residents who need help with bathing, medication and meals, and those fees exist only while the state lets the operator keep its doors open. That makes the operation part of the collateral. A lender who funds the building also funds the people inside it.
The bad version is a buyer who underwrites the roof, the parking lot and the price per unit, then learns about the staffing problem from the state's inspection report. Read the operation first. The building tells you what the facility could earn, while the operation tells you what it will earn under your name.
1. Settle who holds the license before who holds the deed
The state licenses the facility. Before you sign the purchase agreement, ask the state whether your purchase needs a change-of-ownership approval or a new license, what the application asks for, and how long its review takes. Put that review inside the closing timeline. A lender wants proof the facility can legally operate the day after close.
Memory care adds a layer. Secured units, dementia training and staffing on the unit can carry state rules on top of the facility license, so ask the state what applies to the unit you are buying. Write the answer into your data room.
Then decide who operates. If you or a partner has run a licensed care facility, you can apply for the license through your own operating company. If not, hire an experienced operator under a management agreement. The lender and your investors will read it line by line.
2. Match the debt to who operates
The SBA lends to operating businesses. If your company runs the facility and the deal fits under the $5M SBA 7(a) cap, a 7(a) loan can cover the business and the building together. A company that only owns the building and leases it out is passive. It does not qualify on its own.
Dave Klivans, co-founder of ag.online, worked with Raises.com®, and his real estate acquisitions include a memory care facility secured by SBA and commercial bank debt. Each layer of debt reads the same numbers. The team built a family-office-level financial model across his personal and business entities to surface the DSCR metrics his lenders required, and consolidated his holdings into one data room. DSCR measures cash flow against debt payments.
Above the SBA cap, or when you are not the operator, the senior debt is a conventional bank loan or agency debt. HUD's Section 232 program insures mortgages on assisted living facilities, and Fannie Mae lends on seniors housing. Both read the operator alongside the building. If the facility is still filling its beds, start on a bank or bridge loan and refinance later.
3. Put the equity in a single-asset SPV
Investor equity fills what the debt does not, and it belongs in an SPV that owns one facility and nothing else. Dr. Roberta Hoskie worked with Raises.com® and gives each project its own SPV under one compliant Rule 506(b) structure, so one project's risk and investors stay walled off from the next. A care facility needs that wall even more. A resident claim or a bad inspection at one building should never reach the investors in another.
Split the deal in two when the operator is not you. A property company owns the building, an operating company holds the license and the staff, and a lease between them sets the rent the operation pays the building. Investors then know which risk they own.
4. Answer the questions an apartment investor never asks
An apartment investor asks about rents, repairs and the exit. A care facility investor asks four more things, and the PPM should answer each one before the first call.
Who holds the operating license?
Name the licensee in the PPM, with the state's approval or the application status beside it, because a facility without a license has no revenue to distribute. Put the license itself in the data room.
What happens if the operator leaves?
The management agreement should say how it ends, how a replacement operator takes over, and what the state requires before the new operator can run the building. Without that answer, the risk sits with your investors.
What does the survey history show?
Pull the state's inspection reports for recent years, with every citation and plan of correction, and post them unedited. A clean history is a selling point. A cited one, explained, still beats a surprise.
Who staffs it, and who insures it?
Show the staffing schedule, the administrator's background, how much of the work runs through outside agencies, and the facility's professional liability coverage with its claims history. Expect follow-up questions on each.
5. The file a lender and an investor will ask for
Build it before the first lender call.
- The state license, any memory care approval and the change-of-ownership application.
- State inspection reports with citations and plans of correction.
- Monthly census reports and the resident roster with level-of-care charges.
- Three years of financial statements and tax returns, plus year to date, by month.
- Staffing schedules, payroll and outside agency invoices.
- The resident agreement, the management agreement and any lease between the property and operating companies.
- Professional and general liability policies with loss runs.
- A property condition report, a Phase I environmental site assessment and the latest fire and life safety inspection.
Then add the investor documents for the SPV: the PPM, the subscription agreement and the operating agreement. File Form D within 15 days of the first sale.
Apartment building vs care facility
| Question | Apartment building | Assisted living or memory care facility |
|---|---|---|
| What earns the income | Leases with tenants | Fees from residents and payers for housing and care |
| State care license | None | The state licenses the facility |
| What the lender reads | The building and the rent roll | The building plus licensing, staffing, census history and the operator |
| Main operating risk | Vacancy and repairs | Staffing, inspections and resident care claims |
| Who runs it | A property manager | A licensed operator, yours or one under a management agreement |
| SBA 7(a) fit | A landlord-only company is passive and does not qualify | Fits when your company operates the facility and the deal is under the $5M cap |
Frequently asked questions
Can I use an SBA loan to buy an assisted living facility?
Yes, if your company will operate the facility, the deal fits under the $5M SBA 7(a) cap, and you meet the SBA's eligibility rules. A company that only owns the building and leases it out is passive and does not qualify. Ask the lender how it handles the license review timing.
Do I need healthcare experience to buy assisted living?
You need an experienced operator, and it does not have to be you. Hire one under a management agreement, put their record in the PPM, and expect the lender and the state to review them. Experience on paper beats a promise to learn.
Does the license transfer when I buy the facility?
Ask the state before you sign, because the answer decides your closing date. A change of ownership can require an approval or a new license, and the facility cannot run without one. Make the state's answer a closing condition.
How is financing memory care different from assisted living?
Memory care is read harder on staffing and safety. The units are secured, the residents need more supervision, and the state can add rules for the unit. The lender reads that wing's staffing and inspections first.
Raises.com® builds the structure behind the purchase of a business or a building, care facilities included: the PPM, the subscription and operating agreements, the CFA financial proformas and the data room. That keeps the raise legally and financially sound before a lender or an investor reads the file. See how acquisition capital gets structured at https://raises.com/buy-a-business, or book a strategy call at https://raises.com/call.
General information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.