Assisted Living Facility Financing … getting started

Loan document for financing an assisted living facility

Over the years there have been many individuals who have approached us wishing to explore opportunities to enter into the assisted living market, or existing providers who are studying local markets and looking to build new projects or possibly expand their current operations. Of course, all of this requires funding, and assisted living facility financing can be a daunting task. But, it can be easier to navigate with a few basics.

With the above in mind, the following represents what information long-term care providers will need to have prior to seeking any assisted living facility financing.

In this Article …


What types of loans are available for assisted living facility projects?

In general, there are three main types of loans that assisted living providers, or any other healthcare facilities, seek …

Construction loans to build new facilities
Acquisition loans to acquire existing healthcare facilities
Refinance loans a few reasons …

  • to replace current debt that carries a high-interest rate
  • to replace recourse with non-recourse debt
  • to modernize or re-position a facility in an existing market
  • to cash out with some equity


What are the types of assisted living facility financing lenders?

There are three typical types of lenders for financing an assisted living project …

Banks loan profiles include …

  • recourse loans (personal guarantees)
  • 20-25 year amortization with a five-year maturity
  • interest rate float with prime or LIBOR
  • typically not interested in cash out
Specialty finance companies loan profiles include …

  • recourse loans (personal guarantees)
  • 20-25 year amortization with a three to five-year maturity
  • interest rate float with prime or LIBOR (typically higher than bank rates)
  • will entertain some portion to cash out
Specialty finance companies loan profiles include …

  • non-recourse for FHA/HUD
  • up to 35-year amortization, fully amortizing
  • interest rates fixed for the entire loan term (at closing)
  • no cash out


What makes a good assisted living facility borrower in the lenders’ eyes?

Contrary to what some operators and owners believe, this is not one of those black-box questions with mysterious answers.  Here are some characteristics that lenders are going to be looking for …

Industry experience seems kind of obvious doesn’t it, but don’t forget to highlight your experience – it counts!
Accurate data with at least three years of operating results (please make sure it’s organized too!
Good credit history if you don’t it’s not the end of the world, but it will definitely limit your options
Positive trend analysis lenders are not particularly anxious to lend to someone whose operating results have been trending downwards for the past few years

Don’t forget that a presentable facility with a good star rating is a definite plus in the lenders’ minds too.


What help should I consider when seeking financing for an assisted living project?

Seeking out a healthcare consulting firm that’s well-versed in assisted living and other long-term care projects will give you a critical ally who can make sure all of what you will need for this process is in order. Another professional who can be of immeasurable benefit is a financial consultant. Why?  Lenders are constantly entering and exiting the market and each of them has its own sweet spot and its own appetite for certain situations.  It helps to know what product(s) may best fit the owners’/operators’ short, medium and long-range goals.  Plus, it is important, as I mentioned before, that the borrower is organized and prepared for the financing process.  Good help can avoid wasted time, facilitate the financing process and better ensure financing success.

Stay tuned for a follow-up post where I’ll discuss essential information that borrowers need to know before they start down the path of financing your LTC project.

When you need proven expertise and performance

Craig Fukushima, NHA, MBA

Mr. Craig T. Fukushima’s health care experience spans more than 35 years with special expertise in the long term care sector, including implementation of innovative health care projects in domestic and international locations.

Comments are closed.