Assisted Living Facility Financing: Loan Guide

Assisted living facility financing covers the loans and capital strategies used to acquire, build, or refinance senior care communities across the United States. With the U.S. assisted living market valued at over $45 billion in 2025 and projected to reach $91 billion by 2033 (Grand View Research), financing these specialized properties has become one of the most active segments in commercial lending. Whether you are purchasing an existing community, building a new facility, or refinancing to lock in a better rate, understanding your loan options is essential.

The most common assisted living facility financing programs include HUD/FHA 232 loans, SBA 504 loans, conventional commercial mortgages, CMBS loans, bridge financing, and USDA Community Facilities loans for rural properties. In this guide, we break down every major financing option with current 2026 rates, terms, and qualification requirements.

What Are the Best Loan Options for Assisted Living Facility Financing?

The best loan options for assisted living facilities include HUD/FHA 232 loans for long-term fixed-rate financing, SBA 504 loans for owner-operators seeking low down payments, and bridge loans for fast acquisitions. Your ideal program depends on whether you are acquiring, building, or refinancing.

HUD/FHA 232 Loans offer non-recourse, fixed-rate financing with terms up to 40 years for construction and 35 years for acquisition or refinancing through the 232/223(f) program. As of early 2025, HUD 232 rates hovered near 6.06%, though they fluctuate with Treasury yields. The maximum LTV is 80% for for-profit borrowers and 85% for nonprofit organizations, with a minimum loan amount of $2 million. These loans are fully amortizing with no balloon payment. The tradeoff is a longer closing timeline, often 6 to 12 months, and extensive documentation requirements.

SBA 504 Loans are an excellent fit for owner-occupied assisted living facilities. The January 2026 SBA 504 rates are 5.85% for 25-year terms, 5.91% for 20-year terms, and 5.67% for 10-year terms. The program allows up to 90% financing with only a 10% down payment. Learn more about SBA loan programs for commercial properties on our blog.

Bridge Loans are critical for time-sensitive acquisitions. Bridge lenders can close in 15 to 45 days compared to 120 days or more for bank financing. Rates typically range from 8% to 12% with 12 to 24 month terms. Many investors use a bridge loan to acquire a facility quickly, then refinance into a permanent HUD or SBA loan.

CMBS Loans provide non-recourse financing with LTVs up to 75% and terms of 5 to 10 years. They require a minimum DSCR of 1.25x and work well for stabilized properties with strong occupancy histories.

Conventional Commercial Mortgages from banks and credit unions offer flexibility in structure but typically require higher down payments (25% to 35%) and shorter terms (5 to 25 years). They suit borrowers with strong banking relationships and experienced management teams.

For a detailed overview of acquisition financing, visit our acquisition loans page.

How Much Does It Cost to Build or Acquire an Assisted Living Facility?

Building an assisted living facility in 2026 costs between $280 and $452 per square foot depending on finishes and amenities, according to Weitz Construction. Acquiring an existing facility varies widely based on location, bed count, and occupancy, but per-unit development costs average around $350,000 or more.

Construction cost escalation has moderated from pandemic-era highs. In 2026, cost increases are projected at 3% to 4%, down from 8% to 12% during 2021 to 2023. Mid-level projects range from $280 to $356 per square foot, while high-level projects run from $363 to $452 per square foot (Weitz, 2026 Senior Living Construction Costs Report).

For a typical 60-unit facility at approximately 45,000 square feet, construction costs could range from $12.6 million to $20.3 million before land, soft costs, and furniture, fixtures, and equipment (FF&E). When you factor in land, architectural fees, permitting, and pre-opening expenses, total development costs frequently exceed $20 million to $30 million for a purpose-built community.

Acquisition costs for existing facilities depend heavily on the property's stabilized net operating income (NOI). Cap rates for senior housing have generally ranged from 6% to 9%, meaning a facility generating $1 million in annual NOI might sell for $11 million to $16.7 million. Use our commercial mortgage calculator to estimate monthly payments on your target purchase price.

Understanding commercial loan down payment requirements is critical before you begin your search. Most programs require 10% to 25% down, with SBA 504 offering the lowest entry point at just 10%.

What DSCR and LTV Ratios Do Lenders Require for Senior Housing?

Lenders typically require a minimum debt service coverage ratio (DSCR) of 1.20x to 1.30x and loan-to-value (LTV) ratios between 70% and 85% for assisted living facility financing. The specific thresholds vary by loan program, with government-backed options offering the most favorable leverage.

The DSCR measures whether a property's net operating income covers its annual debt payments. A DSCR of 1.25x means the property generates 25% more income than needed to service the loan. For assisted living, lenders are particularly careful because these properties function as operating businesses with staffing costs, regulatory compliance, and occupancy fluctuations affecting the bottom line.

HUD 232 loans require a DSCR of at least 1.20x for market-rate properties and 1.15x for affordable housing. SBA 504 and CMBS programs require a minimum of 1.25x. Conventional lenders often set the bar at 1.30x or higher.

On the LTV side, SBA 504 leads with up to 90% financing, followed by HUD 232 at up to 85% for nonprofits. CMBS and bridge programs generally cap at 75%. Try our DSCR calculator to model your borrowing capacity, and visit our DSCR loan programs page for details on income-based lending.

Why Is Senior Housing Demand Creating a Historic Financing Opportunity?

Senior housing demand is surging because the oldest baby boomers turn 80 in 2026, the 85-plus population will grow by 183.8% between 2020 and 2060, and current development meets only one-third of projected need. This supply and demand imbalance is creating one of the strongest investment cases in commercial real estate.

According to the National Investment Center for Seniors Housing and Care (NIC), senior housing occupancy reached 89.1% across 31 primary markets in Q4 2025, with assisted living hitting 87.7%. Experts anticipate occupancy will surpass 90% by late 2026. Year-over-year inventory growth in 2025 was just 1%, the lowest since NIC began tracking data in 2006.

The U.S. Census Bureau projects that by 2030, all baby boomers will be over 65. By 2035, the 80-plus population will surge from 14.7 million to nearly 23 million. Industry projections estimate a need for over 600,000 additional senior housing units by 2030 (NIC MAP).

This demographic wave is driving rental rate growth. In 2025, assisted living asking rates rose 5.9% year over year, with operators planning 4% to 7% increases for 2026 (Senior Housing News). The average monthly cost reached $5,676 per resident in 2025. For new investors, our guide on how to get a commercial loan with no experience provides practical steps to build lender credibility.

How Do HUD 232 Loans Work for Assisted Living Properties?

HUD 232 loans provide government-insured, non-recourse, fixed-rate financing specifically designed for residential care facilities with 20 or more patients, including assisted living, skilled nursing, and memory care properties. They offer the longest terms and lowest rates available for this property type.

The program comes in two forms. Section 232 new construction loans feature terms up to 40 years. Section 232/223(f) loans finance acquisition or refinancing of existing facilities with terms up to 35 years. Both offer fixed rates that protect borrowers from market volatility.

Key advantages include non-recourse lending (the property serves as collateral rather than the borrower's personal assets), high leverage (up to 85% LTV for nonprofits), and full amortization with no balloon payment. The current rate structure sits near 6%, though exact rates depend on market conditions at rate lock.

The primary drawback is timeline and complexity. HUD loans require a third-party appraisal, Phase I environmental assessment, property condition assessment, and management approval. The application-to-closing process typically takes 6 to 12 months. Borrowers must also fund replacement reserves and pay mortgage insurance premiums. Despite these requirements, the long-term cost savings from low fixed rates and extended amortization make HUD 232 the preferred permanent financing vehicle for many operators.

Can SBA 504 Loans Be Used for Assisted Living Facilities?

Yes, SBA 504 loans are an excellent match for assisted living facilities, and the SBA itself recognizes these properties as a strong use case. The key requirement is that the borrower must be the owner-operator of the facility.

The SBA 504 program structures financing as a partnership: a conventional lender covers 50% of the project cost, a Certified Development Company (CDC) covers 40% through an SBA-backed debenture, and the borrower contributes 10% as a down payment. This structure allows borrowers to access up to 90% financing at blended rates well below conventional alternatives.

As of January 2026, SBA 504 debenture rates are 5.85% for the 25-year term, 5.91% for the 20-year term, and 5.67% for the 10-year term. Eligible uses include purchasing an existing facility, constructing a new building, purchasing land and equipment, and refinancing existing debt.

This program is particularly attractive for first-time investors because the 10% down payment is the lowest of any major financing program. For a $5 million acquisition, that means just $500,000 out of pocket versus $1.25 million or more with conventional financing. Explore our SBA loan programs page for eligibility details.

What Role Do Bridge Loans Play in Assisted Living Acquisitions?

Bridge loans serve as short-term financing that allows investors to acquire assisted living facilities quickly, stabilize operations, and then transition to permanent financing. They are especially valuable when sellers favor fast closings.

The typical bridge loan features a 12 to 24 month term, rates from 8% to 12%, and LTVs up to 75%. Where conventional bank financing takes an average of 120 days to close, bridge lenders routinely fund transactions in 15 to 45 days. This speed premium comes at a higher interest rate, but the ability to secure a desirable property before competitors can justify the cost.

Common bridge loan use cases in the assisted living sector include acquiring underperforming facilities that need operational turnaround before qualifying for permanent financing, purchasing properties during the licensing transfer process, and closing on time-sensitive deals where seller deadlines are firm. Many sophisticated investors pair a bridge loan with a pre-approved HUD 232 or SBA 504 takeout strategy, using the bridge as a stepping stone to permanent low-cost financing.

How Do State Licensing and Revenue Factors Affect Assisted Living Financing?

State licensing requirements directly impact financing because lenders will not fund a project without a valid license or a clear path to obtaining one. Each state maintains unique standards for staffing, care scope, physical plant, and administrator qualifications that affect both project timelines and operating cost projections.

Lenders evaluate several licensing and regulatory factors during underwriting. These include the applicant's current licensure status, the state's staffing ratio requirements (which affect operating expense projections), Life Safety Code compliance (sprinkler systems, ADA accessibility, fire safety), Certificate of Need requirements in states that mandate them, and Medicaid certification status. A facility with Medicaid waiver participation demonstrates revenue diversity, which strengthens the loan application.

Some states, such as Minnesota and North Dakota, have developed assisted living programs specifically through Medicaid waiver structures. States with Certificate of Need (CON) requirements can add 6 to 12 months to your project timeline. Administrator licensing is critical, as both HUD and SBA programs verify management qualifications during underwriting.

On the revenue side, lenders analyze revenue per occupied unit, occupancy trends, payer mix, and operating margins. Revenue comes from private pay (the largest share), Medicaid waivers, long-term care insurance, and veterans benefits.

Labor costs typically consume 50% to 60% of total revenue, making workforce management the single most important profitability driver. Lenders scrutinize staffing plans, wage assumptions, and turnover rates when underwriting assisted living loans.

For underwriting purposes, lenders typically want to see a stabilized occupancy rate of at least 85%, an operating margin of 25% to 35%, and a clear plan for managing occupancy fluctuations. Properties with occupancy above 90% and strong year-over-year revenue growth are in the best position to secure favorable terms. Operators planning moderate 4% to 7% rent increases in 2026, in line with market trends reported by NIC, will find lenders receptive to their projections.

If you are considering a refinance of an existing property, current market conditions with rising occupancy and strong rental rate growth create a compelling case. Working with an experienced commercial loan advisor early helps align your financing strategy with regulatory requirements.

What Are the USDA Financing Options for Rural Assisted Living Facilities?

The USDA Community Facilities Direct Loan and Grant Program provides low-interest, long-term financing for assisted living facilities in rural communities with populations under 20,000 for direct loans and under 50,000 for guaranteed loans. This program is powerful but underutilized.

USDA Community Facilities loans offer terms up to 40 years and can cover land acquisition, construction, professional fees, and equipment. Grant assistance ranges from 35% to 75% based on community population size and median household income. Eligible borrowers include municipalities, counties, nonprofit corporations, and tribal governments. To explore your eligibility, contact our team for a consultation.

What Are the Most Common Questions About Assisted Living Financing?

What credit score do I need to finance an assisted living facility? Most lenders require a minimum credit score of 660 to 680, though HUD 232 and SBA 504 may offer flexibility when the overall application is strong. Conventional banks prefer scores of 700 or higher.

How long does it take to close on an assisted living facility loan? Bridge loans close in 15 to 45 days, conventional loans take 60 to 120 days, SBA 504 loans require 60 to 90 days, and HUD 232 loans take 6 to 12 months.

Can I finance an assisted living facility with no experience? Yes, but lenders require evidence of qualified management. You can hire a licensed administrator, partner with an experienced operator, or contract with a third-party management company.

What is the minimum down payment for an assisted living facility? SBA 504 requires just 10%, HUD 232 requires 15% to 20%, and conventional financing requires 25% to 35%. For a $10 million facility, SBA 504 means $1 million out of pocket versus $2.5 million with a conventional lender.

Are assisted living facilities a good investment in 2026? The fundamentals are exceptionally strong. Occupancy rates approach 90% nationally, rental rates grow 4% to 7% annually, and the 80-plus population is entering accelerating growth through 2040. Supply remains constrained at just 1% year-over-year inventory growth.

How do I calculate DSCR for an assisted living facility? Divide annual net operating income (NOI) by total annual debt service. If your facility generates $1.2 million in NOI and annual loan payments total $960,000, your DSCR is 1.25x.

Can I use a bridge loan and then refinance into a permanent loan? This is one of the most common strategies. Investors use a bridge loan to close quickly, stabilize operations over 12 to 24 months, then refinance into a permanent HUD 232, SBA 504, or conventional loan at a lower rate.

Ready to explore your assisted living facility financing options? Contact Clearhouse Lending today to discuss your project with a commercial lending advisor who specializes in senior housing.

Sources: Grand View Research, U.S. Assisted Living Facility Market Report (2024); National Investment Center for Seniors Housing and Care (NIC), Q4 2025 Occupancy Data; Weitz Construction, 2026 Senior Living Construction Costs Report; U.S. Census Bureau, Population Projections; Senior Housing News; SBA.gov, 504 Loan Program; HUD Office of Residential Care Facilities; USDA Rural Development.