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The need for assisted living facilities is growing in the US. If you are looking to open or expand an elder care facility, an SBA 7(a) loan is a great way to help you achieve your business goals.
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Opening an assisted living facility (ALF) is a noble endeavor and a smart move as a business owner. You probably already know that life expectancy in the United States is increasing, and market demand for elder care is increasing as the large baby boomer generation retires.
Clearly, whether you plan to specialize in Alzheimer’s care, open an adult day care center, or build a skilled nursing facility, now is a very important time to get involved in this industry.
You may not know that you don’t need a lot of capital to start your business. You can use a government-backed SBA 7(a) loan to finance the opening or expansion of a senior housing facility and use the money for real estate, land or working capital. In fact, an SBA 7(a) loan is one of the best options for business owners who don’t have a personal line of credit to use or just need a one-time loan to finance an existing facility, such as – to. growth or improvement.
Before we get into the details of an SBA 7(a) loan, here’s a look at your range of financing options for your assisted living facility.
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Financing your ALF can feel like a big hurdle, but there are several options available. There are two main types of business loans: secured and unsecured loans. A secured loan is a loan that has collateral, while an unsecured loan (no collateral required) is given to business owners based solely on their credit and business experience. Both government and private lenders provide financing options, listed below.
If you have excellent credit, a long history or experience managing assisted living facilities, or significant capital (such as an already operating ALF), you may qualify for a conventional business loan. These amounts and rates vary by lender, so check with lenders in your area for more information.
Do you want to buy an existing ALF business? If so, check with the current owner to see if they offer a “dealer financing” option. This means that the lender will be the current owner of your business and will require a down payment and charge interest to purchase the business.
The federal government supports a variety of loans for small business owners. Note that the government does not provide funding directly to businesses. Instead, private lenders and other organizations provide the loan, and the government insures a certain amount in case the borrower defaults.
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The Section 232 loan program is an FHA/HUD loan for assisted living facilities. This program provides mortgage insurance to residential property owners. The FHA does not offer the loan itself; instead, the loan is secured by a bank or lending institution and backed by the FHA. The borrower can use this loan for real estate or land: for the purchase, refinancing, construction or renovation of a nursing home facility.
The SBA 504 loan is an economic development loan designed to help qualified small businesses expand or renovate existing businesses. To get a 504 loan, an ALF would need to contact a Certified Development Company (CDC), which is an organization that partners with the SBA to provide the loan. This loan can be used to purchase real estate to use for your facility, to finance construction or living aids, or to refinance debt (but the debt must include an expansion of an existing business).
The SBA 7(a) loan provides up to $5 million in financing to small businesses. Banks and credit unions across the country offer SBA 7(a) loans to qualified businesses. You can use this type of loan for real estate, working capital or equipment. The main difference between an SBA 7(a) loan and the 504 loan program is how the loan is obtained: for a 7(a), you can find a lender at major financial institutions; for 504, you have to work with CDC. Read more about SBA 7(a) loan terms on our page here.
If you’ve decided that an SBA 7(a) loan is right for your business, use the following checklist to make sure you qualify before you find a lender and fill out your paperwork. To use an SBA 7(a) assisted living loan, you must:
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If this sounds like you, you’re ready to start preparing for your lender meeting! To increase your chances of getting an SBA 7(a) loan, prepare all of the following items before your appointment.
Learn more about how an SBA 7(a) loan can be used for common start-up costs in all businesses.
Good bookkeeping, understanding your credit and a solid business plan can help you when you apply for your loan. However, as with any loan, loans must meet certain standards to qualify.
At , we live and breathe the SBA 7(a) loan process. We connect business owners like you with the best lender for your situation, even if you’re looking outside the SBA 7(a) platform. We serve our customers by 1) offering a free education portal and 2) using our lender matching service to help you on your way to success. We love small American businesses, and we think that shows in our customer-first approach.
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To learn more about the SBA 7(a) loan program or to get a free quote, just click the button below!
The Small Business Administration (SBA) offers a variety of loan products to help you finance an assisted living facility. The SBA 7(a) loan program is the most popular small business loan product and offers several benefits to owners of assisted living facilities.
The SBA 7(a) loan program offers competitive interest rates, long repayment terms and low payments. This makes it easier for owners of assisted living facilities to obtain the necessary funds to purchase or expand their business. In addition, the SBA 7(a) loan program offers flexible terms, so you can tailor the loan to your specific needs.
The SBA 7(a) loan program also provides access to capital that would not be available through traditional lenders. This can be especially helpful for assisted living facility owners who don’t have the credit score or collateral to qualify for a conventional loan.
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Finally, the SBA 7(a) loan program provides access to technical assistance and counseling. This can be especially helpful for owners of assisted living facilities who need help navigating the loan process or understanding the terms of their loan.
Overall, the SBA 7(a) loan program offers several benefits to owners of assisted living facilities. With competitive interest rates, long repayment terms and access to capital, the SBA 7(a) loan program can be a great option for financing your assisted living facility.
The Small Business Administration (SBA) has several advantages in financing an assisted living facility compared to other financing options. The SBA 504 program provides long-term loans at a fixed rate, with only a 10% down payment. In addition, the SBA 504 Green Program provides additional financing to those who want to be more environmentally friendly by reducing their facility’s energy use by 10% through green options such as wind, solar, or geothermal energy, or by investing in a retrofitted new building that uses 10% less energy.
In contrast, unsecured loans are given to business owners based solely on their credit and business experience, and no collateral is required. Secured loans are secured by collateral, but may have higher interest rates and shorter repayment terms than SBA loans.
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To increase your chances of an SBA 7(a) loan, prepare the following items before you meet with a lender:
You may want to know about the SBA 7(a) application and other paperwork. To learn more about eligibility and qualifications for the SBA 7(a) loan, visit https://eligibility-and-qualifications-for-the-sba-7a-loan/.
Potential risks associated with SBA financing for assisted living facilities include the ability to repay the loan, the possibility of cost increases due to inflation, and the potential for changes in the industry that could affect the facility’s profitability. In addition, there is a risk that we will not be able to meet the terms of the loan, such as providing collateral or paying higher interest. Finally, there is a risk that we will not be able to find a lender willing to make a loan. Less
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