How to Finance an Assisted Living or Residential Care Home: Match Your Deal to the Right Loan

Three answers decide which loan fits your care home:

1. What are you doing? Buying, refinancing, or taking cash out.
2. Who will own the property? An investor who leases it to a licensed operator, or the operator who runs the care business.
3. How will you qualify? On the property's rent, on your own income, or on the business's numbers.

Get those three right and the loan follows. This guide walks through each one.

Same house, five license names

A six-bed care home carries a different license name in each state. Lenders and appraisers read the license, so use your state's name in every conversation.

These are business-purpose loans. If you or your family will live in the home, this is not the right loan. That also rules out the owner-run versions of Florida's Adult Family Care Home and Arizona's Adult Foster Care Home, where the state requires the provider or manager to live in the home.

1. What you're financing

Buying an existing care home

You are buying one of two things: the property alone, or the property and the business.

• Property only. You buy the house, and an operator runs the business under a lease. This is a real estate loan. Surest Capital funds it as a long-term loan or a bridge loan.
• Property and business. You buy the house, the operation, the staff and the residents' care in one deal. The business portion (goodwill, furniture, working capital) is where SBA 7(a) usually fits. Surest Capital can finance both: it funds the real estate loan and arranges the SBA loan for the business through its SBA lending partners.

Plan the license before you plan the closing. Licenses often do not move with a sale. Arizona, for example, requires the buyer to obtain a new license, and a lender will not fund a business the buyer is not yet licensed to run (MMCG Invest).

Buying a property to start a care home

• As an investor. You buy the house, a licensed operator leases it, and you collect rent. The loan qualifies on that rent. Get the lease terms and the operator's license plan in writing before you close.
• As an owner-operator. You will hold the license and run the home. During licensing and setup the home earns nothing, so the lender looks at you: your tax returns or bank statements. A bridge loan can carry the property through licensing and into a long-term loan.

Building from the ground up

A construction loan funds the land and the build. Surest Capital funds construction loans for hard costs. Plan soft costs (design, permits, licensing fees) from equity or another line of the budget. Owner-operators building their own home can also look at SBA 504, covered below.

Rate-and-term refinance

You replace the loan you have with a better one: a longer term, a fixed rate in place of a balloon, or a long-term loan that retires a bridge.

• Owner-operator: qualify on your income or on the property.
• Investor: qualify on the lease.

Cash-out refinance

You borrow against the equity you have built to fund the next home, a renovation, or a partner buyout.

• Owner-operator: the lender looks at your income and the home's value.
• Investor: the lender looks at the lease and the value.

2. The four ways to finance it

Long-term loan (Surest Capital funds)

A long-term loan qualifies one of three ways:

• The property's potential income (DSCR). The loan qualifies on what the property can earn, not on your personal income.
• Your tax returns (full documentation). Best when your returns show the income.
• Your bank statements. For self-employed operators whose tax returns understate their cash flow. You qualify on deposits.

SBA 7(a) and 504 (Surest Capital arranges)

Surest Capital arranges SBA loans through its SBA lending partners. The rules that decide most care-home files:

• The business must be licensed and provide care. A residential home that is not licensed and provides no care is a passive business and is not eligible (MMCG Invest).
• 7(a) lends up to $5 million and is the usual route to buy an operating home with its business.
• 504 finances land, building and fixed equipment. Your business must occupy at least 51 percent of an existing building and 60 percent of a new one. SBA treats assisted living as special-purpose property, so the down payment is at least 15 percent, or 20 percent if the business is two years old or less.
• Since October 1, 2026 (SOP 50 10 8.1): a purchase must show 1.25x debt service coverage on the business's historical cash flow, with no credit for planned improvements. New owners put in at least 10 percent. The business portion amortizes over 10 years or less.
• Investors: SBA does not finance property held for rent. The exception is a property company that leases the property to an operating company that signs as guarantor or co-borrower. The rent is capped at the loan payment plus the property's holding costs (13 CFR 120.111). That structure fits an operator who owns the building in a separate company, not an investor seeking a rental return.

Bridge loan (Surest Capital funds)

A short-term loan for the gap: a purchase that needs renovation or conversion, the months between closing and licensing, or a home that has not yet filled its beds. Plan the exit before you close: the long-term loan you will refinance into, and what that lender will need to see.

Construction loan (Surest Capital funds)

For ground-up builds. The loan funds hard costs. Soft costs come from equity or another line of the budget.

3. How you'll qualify

• On you. Tax returns or bank statements. Use this when your income is strong and the rent alone won't carry the loan, or when you are starting a home that has no income yet.
• On the property. DSCR, on the property's potential income. Use this when you are an investor.
• On the business. SBA. Start-ups and new builds rely on projections, often backed by a feasibility study. Purchases of an operating home now qualify on last year's numbers.

Find your starting point

Sources

• SBA Assisted Living Feasibility Study: 7(a) and 504 Loans, MMCG Invest
• 13 CFR 120.111, Eligible Passive Company conditions, Cornell LII
• State license names and size limits: California H&SC 1569.85; RCW 70.128; A.R.S. 36-401 and 36-582; F.S. 429.41; 26 TAC 553