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How To Start An Assisted Living Facility Using the SBA 504


As the population ages, the demand for senior living facilities continues to rise, presenting a promising opportunity for entrepreneurs and investors. Starting an assisted living facility can provide much needed resources for seniors while also becoming a lucrative endeavor for the business owner. The SBA 504 loan is a valuable tool for those looking to start or expand one of these facilities. 

What Is An Assisted Living Facility?

An assisted living facility, also known as an assisted living community or residence, is a type of senior housing that provides a combination of housing, personalized support services, and healthcare assistance to older adults who require help with activities of daily living (ADLs) but do not need the intensive medical care provided in a nursing home. 

Here are some key characteristics of assisted living facilities:

Housing Accommodations

Assisted living facilities typically offer private or semi-private apartments or rooms for residents. These living spaces are designed to provide a sense of privacy and independence while also being equipped with safety features and accessibility features to accommodate the needs of older adults.

Personalized Care Services

Residents of assisted living facilities receive assistance with tasks such as bathing, dressing, medication management, meal preparation, housekeeping, and transportation. Care plans are tailored to individual needs and preferences, allowing residents to maintain as much independence as possible while receiving the support they require.

Recreational and Social Activities

Assisted living facilities offer a variety of recreational, social, and wellness programs to promote engagement, companionship, and overall well-being among residents. These activities may include exercise classes, arts and crafts, cultural outings, educational seminars, and social events.

Dining Services

Meals are typically provided in communal dining areas, with options for residents to choose from a menu of nutritious and well-balanced meals. Dietary restrictions and preferences are accommodated, and residents may have the flexibility to dine at their convenience.

Safety and Security

Assisted living facilities prioritize the safety and security of residents, often implementing features such as emergency call systems, 24-hour staff availability, secure entryways, and surveillance cameras to ensure a safe living environment.

Access to Healthcare Services

While assisted living facilities do not provide skilled nursing care on-site, they may offer access to healthcare services through partnerships with healthcare providers or on-site clinics. This may include regular health assessments, medication management, coordination of medical appointments, and assistance with arranging transportation for healthcare visits.

Are Assisted Living Facilities A Good Idea in 2024?

Absolutely. Senior citizens comprise the fastest growing age group in the United States. One would assume that adult children (a.k.a. potential caregivers) would also be among the fastest growing age groups, but this is not the case. This means that alternative resources for senior care are desperately needed.

Furthermore, affordability of assisted living facilities has also increased relative to private homes and apartments. Rental rates for senior housing have increased 20 percent since 2017 compared to 35.9 percent for apartments and 48.1 percent for single family homes. Given that more than three quarters of senior citizens own their homes, this puts them in a prime position to put the equity in those properties toward many years of senior care and rent. 

Special Considerations for Assisted Living Facilities

While starting an assisted living facility is a good idea, you will need to be aware of the intricacies associated with this particular venture. It is a business, but it is also an important service that requires exceptional planning, organization, attention to detail, networking, and constant updates to better suit clients. 

Assisted living can also be a fairly competitive endeavor. You will need to carefully research location, market demand, regulatory compliance, staffing requirements, and operational logistics. You will want to develop and nurture relationships with healthcare professionals, regulatory agencies, and financial institutions to ensure the success and sustainability of the venture.

What Can You Finance With The SBA 504 Loan?

If you are wondering how to start an assisted living facility, you are also likely wondering what your financing options are. As a small business designed specifically to benefit the community, you can utilize the SBA 504 loan to purchase fixed assets for your senior housing project. Specifically, you can use the SBA 504 for the following: 

Real Estate: The loan can be used to acquire land for the construction of a new assisted living facility or to purchase an existing property suitable for conversion into an assisted living facility.

Construction or Renovation Costs: Funds can be allocated towards the construction of new buildings or the renovation of existing structures to meet the specific requirements of an assisted living facility. This may include modifying interior spaces, installing safety features, or enhancing accessibility for residents.

Equipment and Furnishings: Assisted living facilities require specialized equipment and furnishings to support the comfort, safety, and well-being of residents. This may include medical equipment, mobility aids, furniture, fixtures, and appliances for resident rooms, common areas, and dining facilities. The SBA 504 can help finance all of these things.

Technology Infrastructure: Investing in technology infrastructure is essential for ensuring efficient operations and enhancing the quality of care in assisted living facilities. SBA 504 funds can be used to purchase communication systems, electronic health record (EHR) software, security systems, and other technology solutions tailored to the needs of senior residents.

Licensing and Permitting Fees: Assisted living facilities must comply with state and local regulations, which often involve obtaining licenses, permits, and certifications. SBA 504 loans can cover the associated fees and expenses required for regulatory compliance.

Energy Efficient Upgrades: solar panels, energy rated appliances, better insulation, and other initiatives meant to reduce the facility’s carbon footprint are all covered under the SBA 504 loan. In fact, green projects may actually qualify for more loans and higher total amounts. 

Can An SBA 504 Loan Be Used For Other Types of Senior Housing?

Yes. In addition to assisted living facilities, the SBA 504 loan can be used for other senior housing that involves on-site care. This includes:

  • Memory care facilities
  • Nursing homes
  • Continuing care retirement communities
  • Skilled nursing facilities

The one type of senior housing you cannot finance with a SBA 504 is independent housing. The loan is geared toward small businesses that support job creation, so passive income in the form of real-estate investment in independent housing is not eligible. 

Keep in mind, also, that senior housing facilities are considered “special-use properties” by the SBA. These properties have a very specific design and purpose, which means they are difficult to repurpose to another type of business. Other types of special use properties include amusement parks, golf courses, movie theaters, gas stations, and hotels. Because they are geared toward such a niche function, special use properties are considered higher risk. This means you may be required to supply a somewhat larger down payment in order to mitigate this risk. 

Review of the SBA 504 Loan

The SBA 504 loan program is designed to provide long-term, fixed-rate financing to small businesses for the acquisition, construction, or improvement of commercial real estate and major fixed assets. It works through Certified Development Companies (CDCs) and traditional lenders, offering borrowers competitive terms and lower down payment requirements compared to conventional loans.

In most cases, the borrower provides 10-15 percent as a downpayment, a private lender supplies 50 percent, and a CDC facilitates the remaining percentage via the SBA loan. You are eligible for up to $5.5 million unless you are looking to make energy-efficient upgrades. In this case, you can borrow up to $5.5 million per project for a total of 3 projects (maximum of $16.5 million). 

In order to be eligible, you must be a for-profit business based in the United States and fit the SBA’s sizing parameters, income limitations, and years-in-business requirements. In addition, you will be expected to provide a sound business plan and demonstrate prior experience and strength of character. And, of course, the loan must be used to finance the acquisition of fixed assets only. 

Start An Assisted Living Facility in Colorado

Like the rest of the nation, Colorado’s population over age 60 is growing, while the population under age 60 is shrinking. This means our seniors will need access to affordable, high quality facilities that can give them the care and support they require. One way this can be accomplished by starting a senior living facility, such as an assisted living facility. 

If you are ready to start an assisted living facility in Colorado, contact the professionals at CEDCO.org. We will help you every step of the way through your SBA 504 loan application process to ensure you get the funds you need as quickly as possible. Call or go online today to schedule your free consultation. 

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