Assisted Living and Healthcare Facility Loans

Financing for Assisted Living, Memory Care and Skilled Nursing

INSIGNIA arranges financing for assisted living, memory care, skilled nursing and related healthcare properties, whether the project is an acquisition, a refinance, a renovation or ground-up construction. We structure each request around the operator, the property and the business plan, then place it with the program or lender whose guidelines fit: SBA 504, HUD 232 and 223(f), agency seniors housing, USDA Business and Industry, bridge capital, or bank and credit union term debt.

• Property types
• Programs at a glance
• SBA 504
• HUD 232 and 223(f)
• Agency seniors housing
• Bridge
• USDA B&I
• Construction and renovation
• Underwriting
• Fit
• Process
• FAQs

Property Types We Finance

Healthcare Financing Programs at a Glance

Parameters are indicative, drawn from published program guidelines and lender term sheets, and they differ by lender and facility type. Compare every program INSIGNIA arranges on the Loan Programs page, or see how lender types differ on Capital Sources and Loan Types.

SBA 504 Loans for Healthcare Owner-Operators

SBA 504 is built for operators who own or control the business that occupies the property. It combines a first mortgage from a bank, typically 50% of project cost, with a second-lien debenture issued through a Certified Development Company, typically up to 35%, and the borrower's equity. A real estate holding company that leases the facility to the operating company is a common structure.

Assisted living, nursing and similar facilities are treated as special-purpose properties, so the equity requirement is 15% rather than 10%, and 20% if the operating business is also a startup. The SBA portion is limited to $5 million per project, or $5.5 million for projects that meet specified energy efficiency or manufacturing goals; total project cost is not capped. Eligible uses include land, building acquisition, ground-up construction, renovation and equipment with a useful life of at least 10 years.

The tradeoff is recourse. SBA 504 requires personal guarantees from the principal owners, so borrowers who need non-recourse debt should compare HUD and agency options. For a detailed look at the program, see SBA 504 and 7(a) Loans and the SBA 504 Loan Program page.

Discuss an SBA 504 structure for your facility

HUD 232 and 223(f) Financing

HUD Section 232 insures mortgage loans on licensed healthcare properties and is generally the longest-term, non-recourse source of permanent debt for the sector. The two products serve different purposes.

Eligibility essentials

• Licensed nursing homes, assisted living, intermediate care and board and care facilities.
• The facility must provide continuous protective oversight and offer three meals a day.
• A minimum of 20 beds or units.
• Up to 25% of units may be independent living, and non-resident day care is limited to 20% of gross area and income.
• A single-asset, special-purpose borrowing entity, for-profit or nonprofit.
• For nursing homes, state certificate of need documentation where the state requires it; assisted living and board and care facilities generally need a statement from the state agency.

Considerations

HUD loans are secured by a first lien on the property, carry a mortgage insurance premium and HUD fees, and include a negotiated prepayment lockout followed by a declining premium. They are fully assumable with HUD approval. HUD processing times vary with agency workload and run longer than conventional lending, which is why transactions with a closing deadline often start in bridge or bank financing. Details are on the HUD/FHA 223(f) and 232 Loans page.

Request a HUD 232 or 223(f) pre-screen

Agency Seniors Housing Loans

Fannie Mae and Freddie Mac both finance seniors housing through their approved lenders. These programs are most often a fit for stabilized independent living, assisted living and memory care communities with experienced operators, consistent occupancy and verifiable operating history. Leverage is lower and coverage minimums are higher than for conventional multifamily, reflecting the operating risk in the asset class. Loans are generally non-recourse with standard carve-outs and are available fixed or floating, with yield maintenance or defeasance on fixed-rate loans. Agency lending for apartment properties is covered on the Agency Multifamily Loans page.

Discuss agency financing for a stabilized community

Bridge Financing for Healthcare Properties

Bridge capital fits healthcare transactions that are not yet ready for permanent financing. Common situations include an acquisition where occupancy or operating history does not yet meet agency or HUD requirements, a property less than three years past its certificate of occupancy, an operator transition, a repositioning or renovation, and a lease-up that needs time to stabilize. The bridge loan is sized to the as-is value, the cost and the business plan, and the exit is typically a HUD, agency, bank or SBA takeout identified at the outset. More on structure and use cases is on the Bridge Loans page.

Request bridge financing options

USDA Business and Industry Loans for Rural Operators

USDA Business and Industry (B&I) loans guarantee loans made by approved lenders to for-profit and nonprofit businesses in rural areas, generally communities of 50,000 or fewer residents. Healthcare operators in qualifying locations can use the program for acquisition, construction and refinance, with terms of up to 30 years on real estate. Property eligibility can be checked on the USDA eligibility map before a request is structured.

The USDA Community Facilities guaranteed program is a different product. It serves public bodies, nonprofit organizations and tribes, so a for-profit operator would not qualify under it. Program detail is on the USDA B&I Loans page.

Construction, Renovation and Energy Improvements

Ground-up healthcare construction can be financed through HUD 232, through SBA 504 for owner-operators, or through construction and bridge lenders with a planned permanent takeout. Renovations and expansions can use SBA 504, HUD substantial rehabilitation or bridge financing. Energy efficiency improvements may also qualify for C-PACE financing in states with active programs. The capital stack, draw and takeout considerations for commercial construction are covered on the Ground-Up Construction Loans page.

How Lenders Underwrite Healthcare Real Estate

Healthcare loans are underwritten as both a real estate asset and an operating business, so lenders focus on the operator as much as the building.

To test a scenario before approaching lenders, use the DSCR Calculator and review how debt yield and loan sizing interact.

When These Programs Are Not the Best Fit

• Facilities with fewer than 20 beds or units generally fall outside HUD 232 and 223(f); SBA 504, bank or bridge financing are the usual alternatives.
• Properties less than three years past their certificate of occupancy cannot use 223(f) and often start in bridge or bank financing.
• Transactions that must close quickly are better suited to bridge or bank financing than to HUD.
• Passive investors leasing to an unaffiliated operator generally cannot use SBA 504; HUD, agency, bank and bridge are the alternatives.
• Urban and suburban properties are outside the USDA B&I rural eligibility area.
• Operators with licensing or survey issues face narrower lender appetite and may need bridge financing while the issues are resolved.
• Home health agencies and other operating businesses need operating company financing rather than real estate programs.

How INSIGNIA Arranges Healthcare Financing

1. Intake and structuring. We review the property, the operator and the business plan, then determine which programs fit and in what sequence.
2. Packaging and lender selection. We prepare the credit package, address the issues a lender will raise, and present it to the programs and lenders suited to the transaction.
3. Execution. We manage underwriting, third-party reports, licensing and regulatory approvals, and closing coordination across counterparties.

Information we ask for first

• Trailing 12 month operating statement and the two prior years
• Current census or rent roll with in-place rates
• State licenses and the most recent survey or inspection results
• Operator resume and management agreement, if applicable
• Sponsor financial statement and schedule of real estate owned
• Purchase contract, or construction budget and plans for development
• Entity ownership chart

Closed financings across property types and programs are shown on Representative Transactions.

Healthcare Financing FAQs

What types of healthcare facilities does INSIGNIA arrange financing for?

Assisted living, memory care, skilled nursing and intermediate care, adult day care, psychiatric and behavioral health facilities, and the operating businesses that run them, including home health agencies. Financing may be for acquisition, refinance, renovation or construction.

Is SBA 504 or HUD 232 better for an assisted living owner?

It depends on the operator, the loan size and the tolerance for recourse. SBA 504 suits owner-operators who want a fixed rate on most of the project and 15% equity, but it requires personal guarantees. HUD 232 and 223(f) offer longer fully amortizing terms and non-recourse debt, with a minimum of 20 beds or units, a longer process and negotiated prepayment restrictions.

What is the difference between HUD 232 and 223(f)?

Section 232 finances new construction and substantial rehabilitation. Section 232/223(f) finances the acquisition or refinance of existing facilities that are at least three years past their certificate of occupancy.

Are HUD healthcare loans non-recourse?

Yes, with standard carve-outs for items such as fraud, misapplication of funds and environmental matters. The loan is still secured by a first lien on the property.

How much equity is required?

SBA 504 typically requires 15% equity for these properties, and 20% for a startup operator. HUD 223(f) is sized to the lesser of 80% of value (85% for nonprofits) and a 1.45x debt service coverage, so equity is commonly 20% or more. Bridge and bank equity varies by lender and business plan.

How long does healthcare financing take?

Timing depends on the program. HUD processing varies with agency workload and is longer than conventional lending, while bank and bridge financing generally close faster. We discuss realistic timing against your closing deadline before choosing a path.

Can you finance a facility that is not stabilized or has a new operator?

Often through bridge financing, which is sized to the business plan and designed to be taken out by HUD, agency, bank or SBA financing once the property qualifies. The operator's experience and the lender's comfort with the transition drive the outcome.

What interest rates apply?

Pricing is set by the program or lender at the time of rate lock and depends on the property, operator, leverage and market conditions. INSIGNIA does not post loan rates. The Interest Rates page shows benchmark index levels such as Treasury, SOFR and Prime.

Where does INSIGNIA arrange healthcare financing?

Nationwide, except Alaska, Arizona, Maine, Minnesota, Nebraska, Nevada, North Dakota, South Dakota and Vermont.

This page describes programs INSIGNIA arranges and is provided for general information. Program parameters shown are indicative, are drawn from published program guidelines and lender term sheets, and change over time and by lender. Pricing, leverage and terms depend on the property, operator, sponsor and market conditions. All loans are subject to credit approval and program eligibility.