SBA loans are the most powerful financing tool available for buying, starting, constructing, or refinancing a residential assisted living business. The SBA 7a loan program allows you to finance both the business and the real estate in a single loan — often with little or no money down — while offering terms up to 25 years. Whether you’re purchasing your first board and care home, expanding a portfolio of RCFEs, or refinancing a floating-rate care home mortgage into a long-term fixed rate, this guide covers everything you need to know.

Originally published June of 2024 — Updated February 2026 to reflect current SBA 7a loan program guidelines, rates, and eligibility requirements.

Questions? Call 1-800-414-5285 or email  to discuss your specific situation.

SBA Loan Overview for Residential Assisted Living Businesses

Residential assisted living facilities occupy a unique position in the lending world: they’re legally residential properties, but they operate as licensed commercial businesses. This hybrid status confuses most conventional lenders and makes it very difficult — sometimes impossible — to secure traditional financing. SBA loans, particularly the SBA 7a, were built for exactly this scenario.

With an SBA 7a loan you can finance:

• The purchase of an existing residential assisted living business
• The business and the home/real estate together in a single loan
• Ground-up construction or full conversion of a single-family home into a care facility
• Purchase plus renovation of a property
• Refinance of an existing care home mortgage — including other SBA loans
• Startup of a new care home business (with appropriate qualifications)

No Down Payment Financing for Experienced Operators

One of the most significant advantages of the SBA 7a program for residential care home owners is the ability to acquire (or start) additional facilities with no money down. This is not a teaser — it’s a real program available to operators who meet the following conditions:

• You already own at least one successful residential assisted living facility
• You have operated it long enough to demonstrate strong, stable cash flow — typically at least one full year under your ownership, possibly evidenced by at least one business tax return
• The financials or return show adequate profit to support the existing operation
• The business plan and projections show adequate demand and cash flow if starting a new location.
• You have good personal credit and sufficient reserves

Lenders will drill down on all strengths and weakness of both you and your business when making a decision. Your track record and experience are important, as are your credit and post-closing liquidity (reserves). If you can show that you run a profitable, well-occupied facility, many lenders will allow you to expand without a down payment because your proven history reduces their risk significantly.

5% Down Payment With Seller-Held Debt (RCFE & Similar Businesses)

If you are purchasing your first facility, a 5% down scenario is possible if the seller is willing to hold 5% of the purchase price on full standby for the life of the SBA loan. “Full standby” means the seller agrees not to receive payments on that seller note until the SBA loan has been paid off or refinanced. Combined with sufficient cash reserves and strong borrower qualifications, this structure can significantly reduce your out of pocket to buy a facility.

Acceptable Down Payment Sources for SBA Care Home Loans

When a down payment is required — typically 5% to 10% of the total project cost — the SBA allows considerable flexibility in where those funds can come from. Acceptable sources include:

1. Cash or liquid assets — savings, checking, money market accounts
2. Borrowed funds — you can borrow your entire down payment as long as you have a separate, stable source of income (from another business, a job, or a spouse’s income). A home equity line of credit (HELOC) on a primary residence or investment property is one of the most common approaches, especially in high-appreciation markets like California.
3. 401(k) from a former employer — can be rolled into a new business entity tax- and penalty-free using a ROBS (Rollover for Business Startups) structure
4. Loan against a 401(k)
5. Gift funds
6. Outside investors — investors can contribute cash in exchange for a minority ownership stake in the business. Keep any single investor below 20% ownership to avoid requiring them to personally guarantee the SBA loan.
7. Seller-held second on full standby — the seller can hold up to half of the required down payment as a second lien, as long as it is on full standby (no payments to the seller until the SBA loan is retired). This is how some buyers get into a facility with as little as 5% out of pocket.

Financing a New Residential Care Home Business (Startup)

Starting a brand-new residential assisted living business — one with no operating history — is absolutely financeable through the SBA 7a program, but it requires a stronger application package than an acquisition of an established facility. The SBA rules require 10% down for a startup, though the source of that down payment can be any of the options listed above.

To qualify for a startup care home loan, you’ll need to present:

1. A clear, detailed business plan
2. Financial projections supported by well-reasoned assumptions (not just optimistic numbers)
3. Good personal credit scores
4. Relevant industry experience, or management with that experience
5. Sufficient personal net worth and liquid reserves
6. Outside income (from employment, another business, or a spouse) is a significant plus

The SBA 7a program is particularly well-suited to startups because the SBA guaranty functions as a form of mortgage insurance, covering 75% of the loan amount. This materially reduces the lender’s risk and makes it far easier to get a new-business loan approved than it would be through conventional channels.

Refinancing an Existing Care Home Mortgage

Many residential care home owners financed their properties years ago with a floating-rate SBA 7a loan — and as the WSJ Prime Rate has risen sharply, so have their monthly payments. For a long time, there was no clean way to refinance these loans because conventional lenders wouldn’t touch a residentially-zoned property operating as a licensed care business.

That changed when the SBA updated its guidelines to allow both the SBA 7a and the SBA 504 program to refinance an existing SBA 7a loan on a care home. This is a significant development: the SBA 504 program offers long-term, fixed-rate financing at very competitive rates — exactly what operators on a floating-rate 7a need.

And, 25 year fixed rate SBA 7a loans are possible once you are a proven operator. This might actually be the easier path, because the 504 has some unusual rules re: refinances as you can only refinance the real estate, furniture, fixtures, and equipment (FF&E) portion of your loan. If your original 7(a) included a significant amount of business goodwill, the 504 may not cover the full balance — though you may be able to use a companion 7a to refinance the remaining portion. For a full breakdown, visit our SBA 504 Refinance page.

Refinancing an SBA 7a Loan With a New SBA 7a Loan

The SBA also now permits borrowers to refinance an existing SBA 7a care home loan with a new SBA 7a. This is valuable because a significant number of care home operators are sitting on floating-rate loans at Prime + 1.5% or higher — rates that look especially painful when the Prime Rate is high.

What many borrowers don’t realize is that experienced, high-quality operators can access 7a rates at or below Prime from certain specialty lenders — rates at Prime + 0%, Prime + 0.50%, or even fixed-rate options not tied to Prime at all. If you are saving 2% or more in rate, a refinance into a new 7a typically makes financial sense even after accounting for closing costs and prepayment penalties (which on 7a loans are modest and short-lived).

If you have a floating-rate care home mortgage and haven’t explored your refinance options recently, it’s worth a conversation. You can contact us through our website contact form: Green Commercial Capital contact form.

SBA Construction & Renovation Loans for Assisted Living Facilities

SBA loans are available for ground-up construction, full conversions, and renovations of both residential and commercial assisted living facilities. For experienced, multi-facility operators, 100% construction financing is available — meaning no out-of-pocket equity required to break ground on a new location.

To qualify for 100% construction financing, you generally need:

• A proven track record of profitable ownership and operation of at least one existing facility
• Strong and consistent cash flow from existing location(s)
• A compelling business plan and financial projections for the new location
• An SBA lender experienced in care home construction lending

Some SBA lenders will also build extra working capital into the construction loan to help you ramp up the new location, and will finance all loan payments during the construction period into the loan itself — so you don’t have to make payments out of pocket while the facility is being built and you are inceasing occupancy.

SBA 504 vs. SBA 7(a) for Residential Assisted Living: Which Should You Use?

In most residential assisted living transactions, the SBA 7a is the primary tool because it covers both the business and the real estate. The SBA 504 becomes relevant when you already own the business and want to purchase or refinance the real estate, or when you want to lock in a long-term fixed rate on the real estate portion. In some cases, it’s possible to use both programs simultaneously — a 504 for the real estate and a 7a for the business.

Eligibility Requirements for SBA Residential Assisted Living Loans

Every assisted living facility must meet the SBA’s requirement of providing healthcare or medical services to residents. The SBA has clarified that assistance with Activities of Daily Living (ADLs) — such as help with bathing, dressing, medication management, or transportation to medical appointments — satisfies this requirement. This is intentionally a low bar: facilities do not need licensed nurses on staff unless required by state law to obtain their operating license.

Beyond the healthcare services requirement, qualifying for an SBA care home loan generally requires:

1. Good personal credit — some derogatory items (isolated incidents, explainable events) may be acceptable at the lender’s discretion
2. Relevant experience — industry experience, management experience, or a combination of both
3. Strong occupancy and cash flow from the business being acquired or refinanced
4. Proper licensing — note that some states permit licensing after closing, and reasonable lenders will accommodate this

Financing Larger & Unconventional Facilities

While the most common residential assisted living transaction involves a single-family home converted to house 6–8 residents, SBA loans are not limited to this format. Larger facilities, multi-structure campuses, and unconventional configurations can all be financed as long as the loan request makes economic sense. As one example, a recent transaction involved multiple homes sharing a common dining hall on a single property — a structure that worked well within SBA guidelines.

Residential Assisted Living Facility Types by State

Residential care homes go by different names depending on the state. All of the following facility types are generally eligible for SBA financing as long as they meet the healthcare/medical services requirement:

• California: Residential Care Facility for the Elderly (RCFE)
• Florida: Adult Family Care Home (AFCH)
• Arizona, Oregon, Washington: Adult Foster Home
• Texas: Personal Care Home / Assisted Living Facility
• Many states: Board and Care Home, Adult Care Home, Group Home

Group home financing is also available under the same SBA guidelines, provided the facility provides qualifying care services to residents.

Frequently Asked Questions: SBA Residential Assisted Living Loans