How to Buy an Assisted Living Facility (SBA Acquisition Guide)

The Assisted Living Market: What Buyers Are Actually Seeing

Assisted living is one of the more compelling acquisition categories in healthcare services right now. Demographics are structural. The 65-and-older population in the U.S. will grow from roughly 58 million today to over 80 million by 2040, and residential care capacity is not keeping pace.

From a deal standpoint, there are currently 54 active listings nationally in this category, ranging from $150K to $25M. That wide range tells you something: this is not a homogeneous market. A 6-bed residential care home in rural Texas and a 30-bed licensed facility in suburban Philadelphia are completely different businesses with different licensing, staffing, and financing requirements.

The national median asking price is $1.5M with median cash flow of approximately $339K, implying an average multiple of 3.7x. That is solidly within the SBA financing sweet spot of 3x to 5x, which means most deals in this range pencil out with standard structure.

Texas leads for volume with 12 listings at a median asking price of $595K, making it the most accessible entry point in the country. Pennsylvania has 7 listings but a median of $3M, which reflects the larger, more institutionalized facilities that dominate that market.

Deal Economics: Running the Numbers on a $1.5M Facility

At the national median, the deal math looks like this:

• Asking price: $1,500,000
• Annual cash flow: approximately $339,000
• Implied multiple: 3.7x EBITDA
• SBA loan (80% of purchase): $1,200,000
• Seller note (15% on full standby, 0% interest): $225,000
• Buyer cash equity (5%): $75,000
• Total equity injection (10%): $150,000
• Annual debt service at approximately 10.5% over 10 years: roughly $198,000
• DSCR: approximately 1.71x

That 1.71x DSCR clears the 1.5x floor. A buyer with operational experience in care or healthcare services who can reduce reliance on agency staffing, which is the single biggest cost driver in this sector, could reasonably push toward the 2x target.

These are rough estimates based on market data. Actual terms depend on individual qualification and lender.

One caution on the numbers: many assisted living listings use SDE rather than clean EBITDA. SDE figures include owner compensation add-backs that can be aggressive. Apply a 15% to 50% discount to broker-reported SDE to approximate what a professional operator will actually clear after paying a replacement administrator or director of care.

What Makes Assisted Living Different as an SBA Acquisition

Most SBA acquisitions close without unusual regulatory friction. Assisted living is different.

Every state licenses assisted living facilities independently, and licenses do not automatically transfer with ownership. In most states, a buyer must apply for a new license or a change-of-ownership (CHOW) approval before they can legally operate. That process takes anywhere from 60 to 180 days in most jurisdictions, and it runs parallel to the SBA loan process, not sequentially.

This means the timeline for closing an assisted living deal is typically longer than a standard business acquisition. Plan for 90 to 150 days minimum from LOI to close, and often longer if the state has a backlogged licensing office.

The SBA lender will also want to see the licensing pathway clearly documented before committing. Going into due diligence without a licensing attorney or a consultant who has done prior CHOWs in the target state is a mistake most first-time buyers make once.

Key Due Diligence Items Specific to This Industry

Assisted living due diligence goes well beyond standard financial review. Here is what matters most:

Occupancy and census history. Occupancy is the revenue engine. A facility running at 65% capacity looks very different from one at 90%. Ask for month-by-month census data going back 3 years, not just a current snapshot.

Staffing structure and agency reliance. Agency (temp) staffing costs 2x to 3x the rate of direct hires. A facility that depends on agency staff for 30% or more of its labor is masking a cost problem. Get 12 months of payroll detail by staff type.

State survey history. Every licensed facility is inspected by state regulators on a regular cycle. Request the last 3 state survey reports and any deficiency citations. A pattern of Level 3 or 4 deficiencies (the higher-severity categories) is a red flag that may affect financing and licensure transfer.

Payor mix. Private pay residents generate far more revenue than Medicaid-funded residents in most states. Know the current split. A facility with 80% Medicaid dependence has revenue that is more stable but significantly lower margin.

Owner involvement. Is the current owner also the licensed administrator? If so, your license transfer timeline starts at LOI and runs until you have an approved replacement administrator in place.

Common Pitfalls and How to Avoid Them

The most common mistake in assisted living acquisitions is underestimating the regulatory complexity and building deal timelines around a standard 45-to-60-day close.

The second most common mistake is accepting seller-represented cash flow numbers at face value. Owners often add back their own compensation, a family member's salary, personal vehicle expenses, and other items that a true operator will need to replace. Scrub every add-back.

Third: physical plant condition. Assisted living facilities face ongoing state requirements for facility maintenance, fire safety systems, and accessibility. A deferred maintenance property can require $100K to $500K in capital improvements within 12 to 24 months of acquisition, depending on facility age and state standards.

Build an inspection scope specifically for care home physical requirements. A general commercial property inspector will miss issues that a state licensing inspector will catch.

SBA Financing for Assisted Living: What Lenders Look For

SBA 7(a) is the standard financing vehicle for assisted living acquisitions in the $500K to $5M range. The SBA maximum loan amount is $5M, which covers most deals in this category.

Lenders evaluate three things most closely in this sector: licensing status (the facility must be in good standing with no active corrective action plans), occupancy trends (declining occupancy is a hard no for most lenders), and operator experience (prior care or healthcare management experience materially improves approval odds).

The standard equity injection structure we use on most deals is 5% buyer cash plus 5% seller note on full standby at 0% interest, with the seller note acting as equity rather than debt for SBA purposes. We achieve full standby on over 90% of deals we structure.

At the current approximate rate of 10% to 11% (WSJ Prime plus a spread) on a 10-year term, debt service on a $1.2M SBA loan runs roughly $190K to $200K per year. The facility needs to generate at least $285K to $300K in clean annual cash flow to hit a 1.5x DSCR floor, and $380K or more to reach the 2x target.

How to Buy an Assisted Living Facility: Step-by-Step

Step 1: Qualify Your Buyer Profile

Before sourcing deals, establish whether you meet basic SBA eligibility requirements. You must be a U.S. citizen or permanent resident, have a credit score above 680 (most lenders prefer 700+), have relevant management experience (care industry experience helps materially), and have sufficient liquidity for the 5% cash equity injection. Identify whether your background supports an owner-operator role or whether you will hire an administrator on day one.

Step 2: Define Your Deal Parameters

Set target criteria before looking at listings: geography, bed count range (typically 6 to 30 beds for SBA-appropriate deals), payor mix preference (private pay versus Medicaid), acquisition price ceiling, and minimum DSCR target. Having clear criteria prevents you from spending due diligence capital on deals that were never a fit.

Step 3: Source and Screen Listings

Review active broker listings, off-market opportunities through care industry networks, and direct outreach to owner-operators. At any given time, roughly 50 to 60 assisted living facilities are listed nationally. Screen for occupancy rate above 75%, no active state corrective action, clean survey history, and an asking multiple below 5x cash flow.

Step 4: Submit LOI and Begin Licensing Research Simultaneously

Once you have a target facility, submit a letter of intent covering price, structure, and contingencies. Start the state licensing research the same day. Identify whether the state requires a new license application or a CHOW approval, pull the current license status, and engage a licensing consultant or healthcare attorney in the target state. Do not wait for an accepted LOI to start this process.

Step 5: Complete Financial and Operational Due Diligence

Request 3 years of tax returns, 12 months of bank statements, payroll detail by employee type, census history, and the last 3 state survey reports. Normalize the cash flow by removing non-recurring items and scrutinizing every add-back. Commission a physical plant inspection using a checklist aligned to state licensing standards. Order an environmental assessment if the property is included in the deal.

Step 6: Structure the Deal and Submit SBA Package

Work with your advisory team to finalize deal structure: SBA loan percentage, seller note amount and standby terms, buyer equity injection, and any earnout provisions. The SBA package requires the business tax returns, buyer personal financial statements, business valuation, and licensing documentation. Lender underwriting typically takes 30 to 60 days once the package is complete.

Step 7: Coordinate License Transfer and Closing

Manage the licensing timeline parallel to SBA underwriting. In most states, closing cannot occur until the state approves the ownership transfer or a conditional approval is in place. Work with the seller to maintain operations and staffing continuity through the transition. Budget for a 2-to-4-week overlap period where you and the seller jointly manage the facility before full handover.

Frequently Asked Questions

How much does it cost to buy an assisted living facility?

Nationally, the median asking price for an assisted living facility is $1.5M, with deals ranging from $150K for small residential care homes to $25M for larger licensed facilities. The price varies by bed count, occupancy rate, payor mix, and state. Texas has the lowest entry point among active listing markets, with a median around $595K.

Can I use SBA financing to buy an assisted living facility?

Yes. SBA 7(a) is the standard financing vehicle for assisted living acquisitions up to $5M. The equity injection requirement is 10% of the purchase price, structured as 5% buyer cash plus a 5% seller note on full standby acting as equity. The SBA does not finance deals with active state corrective action orders or facilities under regulatory sanction.

How long does it take to close on an assisted living acquisition?

Assisted living acquisitions typically take 90 to 150 days from LOI to close, and sometimes longer. The licensing transfer or change-of-ownership approval process runs parallel to SBA underwriting and is usually the rate-limiting factor. Buyers who engage a state licensing consultant at the LOI stage consistently close faster than those who start the process after the SBA commitment letter.

What cash flow should I expect from a $1.5M assisted living facility?

At the national median, a $1.5M facility generates approximately $339K in annual cash flow before debt service, representing a 3.7x multiple. After debt service on an SBA loan of roughly $198K per year, that leaves approximately $141K in annual net cash to the buyer. These figures assume clean, normalized cash flow after removing seller add-backs. SDE figures reported by brokers often require a 15% to 50% discount to reflect true operator earnings.

What experience do SBA lenders require to finance an assisted living acquisition?

Most SBA lenders require demonstrated management experience in healthcare, care services, or a related field. Direct assisted living experience is preferred but not always required. Buyers without care industry backgrounds can sometimes offset the experience gap by hiring a licensed administrator or director of care before closing, demonstrating to the lender that operational continuity is secured on day one.

Ready to Evaluate an Assisted Living Acquisition?

Assisted living deals are operationally complex and require more preparation than a typical SBA acquisition. The licensing process, staffing structure, and state regulatory environment all affect whether a deal pencils out and whether it closes on time.

Regalis Capital's deal team reviews 120 to 150 deals per week across all categories, including healthcare and care services. If you are evaluating a specific facility or want to understand how a deal would be structured before you make an offer, we can run the numbers with you.

Talk to our team about assisted living acquisitions