Worked Example: SBA 7(a) Assisted Living Feasibility Study in Utah

This is a worked example, not a client engagement. It shows how a feasibility study would be built for the purchase of an existing, licensed Type II assisted living facility in Washington County, Utah, financed with a single SBA 7(a) loan at the program maximum, and what the numbers would tell a lender, a buyer and the SBA before anyone signs. Program rules rest on 13 CFR part 120, the Utah licensing rules and the site's own SBA program page; each market figure names its publisher, and each project input that is an assumption says so in its row.

At a glance. An operator buys a licensed assisted living facility in Washington County, Utah, below stabilized occupancy, with a $5,000,000 SBA 7(a) loan assumed at the program maximum, a renovation and a working capital reserve. Coverage is 1.11x at the assumed stabilized occupancy and 0.86x on the seller's last fiscal year, against an assumed 1.25x minimum in both tests. Because the purchase is a change of ownership, the historical test binds, and the loan the example supports is $3,428,981 rather than the assumed $5,000,000 request; the decision turns on price, equity and the seller's verified earnings.

• Total project cost: $5,898,125
• SBA 7(a) loan: $5,000,000
• Borrower equity: $898,125
• Stabilized net operating income (Year 3): $629,801
• Debt service coverage at stabilization: 1.11x
• Debt service coverage on the seller's last fiscal year: 0.86x
• Occupancy needed for 1.00x coverage: 85.4%
• Occupancy needed for the lender's 1.25x minimum: 91.4%

The Lender's Question: What a Feasibility Consultant Tests First

A 7(a) lender looking at the purchase of a going-concern assisted living facility has one question before all others: will the cash flow of the business, under the new owner, service the debt with a margin that survives a normal bad year? 13 CFR 120.150 asks that the applicant be creditworthy and that the loan be repayable on its face, and lets the lender weigh earnings or cash flow, equity and collateral ^[1]. The regulation sets no coverage ratio. The page for SBA loans on this site does set one, for a purchase like this: "Acquisitions face a higher bar: Initial Acquisitions, Owner Buyouts and ESOPs need 1.25x on historical earnings, and Business Expansions 1.15x" ^[2]. That figure equals the assumed lender minimum. The page adds that either the latest fiscal year or an average of two years must show it, and that forecasts cannot meet the floor ^[3], except for qualifying special-purpose property, a term the page does not define ^[4]; this example makes no claim that the facility qualifies and holds the historical test. Buying a going concern is a change of ownership, so the example applies that acquisition test. Nobody opened the SOP for this example. A lender minimum of 1.25x is also assumed here, equal to the floor, so the binding minimum is 1.25x and it binds on the seller's historical earnings, not on the buyer's projection. Under 13 CFR 120.160(b) SBA can make a feasibility study a loan condition ^[5], and a lender ordering one here would want the coverage question answered with evidence rather than with the seller's trailing statements.

The question matters more for assisted living than for most owner-occupied real estate because the asset is a licensed care business first and a building second. NIC's margin analysis notes that assisted living is more labor- and care-intensive than independent living, that its results are particularly sensitive to staffing costs, and that labor remains the largest expense in senior housing ^[6]. NIC also reports that in 2025 the lower quartile of assisted living operating margins remained negative while the upper quartile exceeded forty percent ^[7]. A lender cannot underwrite to an industry average when the dispersion is that wide; the study would have to show where this facility would sit in that range and why.

A feasibility consultant would therefore test four things first: whether county demand supports the assumed occupancy, since the ramp is the heart of the credit; whether the assumed monthly rates sit at or below what residents in the market pay; whether the staffing plan meets the Utah Type II minimums and what it costs, since no Utah wage series could be sourced for this example; and whether the resulting net operating income covers 7(a) debt service at the assumed minimum.

Decision. The study would treat the historical coverage test as the binding constraint and would not offer a loan-to-cost ratio as comfort while coverage on the seller's last fiscal year sits below the assumed 1.25x minimum, because 13 CFR 120.150 asks whether repayment is reasonably assured, and coverage is the direct measure of that ^[1].

The Site and Its Market: Washington County, Utah

Washington County occupies the far southwest corner of Utah, on Interstate 15 between the Arizona line and Zion National Park. It is named as context only; the example names no city, facility, operator, lender or address. The reason to place an assisted living example here rather than along the Wasatch Front is in the Census Bureau's county population file: the county grew from 180,284 residents in the April 1, 2020 estimates base to 213,670 on July 1, 2025, and its residents aged 85 and over grew from 4,222 to 5,555 over the same period ^{[8] [9]}.

The asset is an existing building, licensed and occupied, bought as a going concern. That shapes the analysis in two ways. There is no construction risk and no lease-up from zero; the lease-up runs from an assumed Year 1 occupancy of 82.0 percent to an assumed 88.0 percent at stabilization in Year 3. And the facility inherits a resident base, a staff and a license, all of which must survive a change of ownership: Utah rule R432-1-8(3) requires a licensing applicant to submit a fire clearance and a local health department food service sanitation clearance upon a change of ownership ^[10], so the market section of the study would be paired with a licensing timeline that puts those clearances before closing.

No Utah or Washington County assisted living occupancy, rent or supply series was available to this example, so it rests its market anchors on national series and says so each time; a real study would replace them with a local survey of competing facilities, their rates and their vacancies.

Decision. The study would anchor the market on the Census county age cohorts, which are sourced and local, and would treat every national occupancy and rate figure as a ceiling to stay below rather than a target to reach.

Demand: Older Residents in a Fast-Growing County

Demand analysis for assisted living begins with the population aged 75 and over, the age at which assistance with daily activities becomes common. The Census county characteristics file supplies the cohorts; its layout documentation confirms that YEAR code 1 is the April 1, 2020 population estimates base and YEAR code 7 is the July 1, 2025 population estimate ^[11], and that the columns AGE7579_TOT, AGE8084_TOT and AGE85PLUS_TOT hold the populations aged 75 to 79, 80 to 84 and 85 and over ^[12].

Two things stand out. The county's residents aged 65 and over numbered 47,915 in 2025, or 22.4 percent of the population, and the median age was 38.1 ^[9]; that share is high for Utah and marks the county as a retirement destination rather than a family-formation market. Every cohort aged 75 and over grew faster between 2020 and 2025 than the county as a whole ^{[8] [9]}. And the 85 and over cohort, the one most likely to need a Type II level of care, reached 5,555 in 2025 ^[9].

The facility is assumed at 40 licensed units, all private, which places it above the 17-resident threshold at which Utah rule R432-270-4(8) licenses a facility as a large assisted living facility ^[13]. The county's residents aged 85 and over went from 4,222 in the 2020 estimates base to 5,555 in 2025 ^{[8] [9]}, and that increase alone is many times the facility's assumed 40 units, even if only a fraction of the cohort would ever qualify for or choose assisted living. A real study would survey licensed capacity in the county and apply an age- and income-qualified penetration rate; none of that local supply data could be sourced here, and the example does not invent it.

Nationally, NIC reports assisted living occupancy of 89.1 percent in the third quarter of 2026 across the 31 NIC MAP primary markets, up from 88.3 percent in the prior quarter ^[14]. Washington County is not one of those primary markets, so the example assumes a stabilized occupancy of 88.0 percent, below the national figure, and an assumed Year 1 occupancy of 82.0 percent for a facility bought below its potential under new ownership.

Decision. The study would carry the Census cohorts as the demand floor and would require a county supply survey before it put a penetration rate in front of a lender; it would not substitute a national occupancy figure for a local one.

Competition and Supply

A real study would list every licensed assisted living facility in the county by license type, capacity, rate card and observed vacancy; that list could not be sourced for this example. The national supply picture is benign. NIC MAP data reported by NIC show 16,159 independent and assisted living units in development in the third quarter of 2026 and year-over-year inventory growth of 0.4 percent, near record lows ^[15]. That is a figure for the primary markets, and the example does not extend it to Washington County: a county growing this fast is exactly where a developer would consider new senior housing, and a feasibility consultant would check county and municipal permit records for assisted living projects in the pipeline before giving the lender comfort on supply.

Rate competition is where national data say the most. NIC MAP's Actual Rate Report shows year-over-year growth in assisted living in-place, initial and asking rates of 5.3, 6.4 and 5.3 percent in June 2026 ^[16]. At the same time, NIC MAP data show average initial rates for assisted living 9.4 percent ($660) below asking rates in June 2026, equivalent to a 1.1-month discount on an annualized basis ^[17]. An under-occupied facility under a new owner would be the one most tempted to discount, so the model's rate assumptions are collected rates net of concessions: the assumed $4,250 base rate and the assumed $1,250 care charge are what the facility collects, not what it advertises.

The pricing anchor is CareScout's 2025 Cost of Care Survey, which puts the national median monthly cost of an assisted living community at $6,200 ($74,400 a year), up five percent from 2024 ^[18]. The example's assumed $5,500 per occupied unit, combining the assumed base rate and care charge, sits about 11 percent below that national median. No Utah median could be obtained; a real study would replace the national median with the county rate survey and show the facility's assumed rates against the nearest Type II competitors.

On the investment side, CBRE's H1 2026 Senior Housing & Care Investor Survey puts the cap rate for Class A assisted living communities in core markets at 6.5 percent, down 28 basis points in six months ^[19], with an average spread between core and non-core assets of 58 basis points ^[20].

Decision. The study would treat the national supply figure as context only and make a county pipeline search a condition of its conclusion; on rates, it would underwrite to collected rates net of concessions and show the gap to the national median as a margin of safety, not as room to raise prices.

SBA Lending Record for This Asset Class in Utah

Loan Analytics keeps a loan-outcomes dataset built from the SBA's own loan-level 7(a) and 504 files ^[21]. For this example's state and asset class it covers SBA loans approved in fiscal 2017 to 2026 to businesses coded to assisted living (without nursing care), with the project in Utah. The figures are the SBA program's record in the state, not Loan Analytics' work and not this hypothetical project. The dataset notes a limit on the class: only assisted living without on-site nursing has its own code; memory care has none. Assisted living with nursing is counted in C11 and C12.

Cost Basis: Price, Renovation, Reserve and the SBA Fee

The cost basis of a going-concern purchase has three parts that a 7(a) lender treats differently: the real estate, the business assets and the working capital. The inputs table sets out every input, with each assumption labelled and each sourced input cited.

Rounded to the dollar; lines may not foot by $1.

The purchase price is the assumption that matters most, and it is set deliberately low against the market indicators. The assumed price for land and building is $4,600,000, with an assumed $250,000 for furniture, fixtures and equipment and an assumed $350,000 for business assets and goodwill, for a total price of $5,200,000, or $130,000 per unit as the cost table prints it. The cost table shows stabilized net operating income at 12.11 percent of the purchase price and 10.68 percent of total project cost at the requested loan. Set beside CBRE's H1 2026 survey cap rate of 6.5 percent for Class A assisted living in core markets ^[19] and its 58 basis point core to non-core spread ^[20], the assumed price describes an older, under-occupied facility in a non-core market bought at a deep discount to institutional values. No Utah transaction price could be sourced; the assumption is there to show that even a cheap purchase struggles at the assumed leverage.

Each use of proceeds ties to a rule. A borrower may use 7(a) proceeds to purchase a portion of or the entirety of a business under 13 CFR 120.202 ^[25], which covers the assumed $350,000 of business assets and goodwill. Proceeds may be used to purchase existing buildings and to convert, expand or renovate them under 13 CFR 120.120(a) ^[26], which covers the building and the assumed $250,000 renovation. And 7(a) proceeds may be used for working capital under 13 CFR 120.120(b) ^[27], which covers the assumed $200,000 reserve that funds the Year 1 shortfall in the ramp table.

The SBA guaranty fee is sourced as a ceiling. Under 13 CFR 120.210 the SBA may guarantee at most 75 percent of a 7(a) loan above $150,000 ^[30], and the $3,750,000 guaranteed portion in the cost table is also the maximum guaranty amount for one borrower and its affiliates under 13 CFR 120.151 ^[29]. The fee on that portion is not more than 3.5 percent for a loan over $700,000 under 13 CFR 120.220(a)(1)(iii) ^[31]. For the extra charge, clause (iv) of the regulation quotes a quarter point on the guaranteed portion where the loan tops $1,000,000 ^[38]; the statute reaches only the slice of the guaranteed share beyond $1,000,000 ^[32]. The two texts disagree, and the model takes the statute's lower ceiling. The cost table prints a guaranty fee of $138,125 at that ceiling on the requested loan; the fee SBA actually charges in fiscal 2026 could not be sourced.

At the requested loan the cost table shows a total project cost of $5,898,125, a loan of $5,000,000 assumed at the 7(a) maximum, and borrower equity of $898,125, or 15.2 percent of total project cost. The debt table later sizes a smaller loan with its own fee and equity.

Decision. The study would present the price as the lever the buyer controls: at the assumed leverage, the cost table's 84.8 percent loan to total project cost at the requested loan is the reason the coverage tests fail, and a lower price or more equity is the first remedy the study would test.

Revenue Build: Base Rent, Care Charges and the Occupancy Ramp

Assisted living revenue has two layers. The base rate covers room, board and basic services and moves with the housing market; the care-level charge covers assistance with daily activities and moves with acuity. The example assumes an average monthly base rate of $4,250 and an average monthly care-level charge of $1,250 per occupied unit, both in 2026 dollars and held flat through the ramp.

At the assumed 88.0 percent stabilized occupancy the revenue table shows 35.2 average occupied units, $1,795,200 of base rate revenue, $528,000 of care-level revenue and $34,848 of community fees and ancillary income, for an effective gross revenue of $2,358,048 and $58,951 of revenue per available unit per year. The $5,500 average monthly revenue per occupied unit sits below CareScout's 2025 national survey median of $6,200 a month ^[18] as a deliberate margin, not as a Utah observation.

Utah law bounds what the care layer can sell. A Type II license is required where each resident can exit the facility only with the limited assistance of one person under R432-270-4(3) ^[39], so Type II residents are by definition people who need hands-on help, and care charges follow. But Type I and Type II licensees may not provide skilled nursing care under R432-270-14(5)(a) ^[40], so care-level revenue cannot extend into nursing-home acuity. The study would check the assumed $1,250 average care charge against the facility's actual care-level distribution.

The ramp table is the schedule a lender would read most closely. At an assumed Year 1 occupancy of 82.0 percent the net operating income is $487,798 against annual debt service of $569,029, a cash shortfall of $81,232 and coverage of 0.86x. The debt table reuses this Year 1 level as the seller's last fiscal year, for reasons the coverage section gives. At an assumed Year 2 occupancy of 86.0 percent the net operating income is $582,467 and coverage is 1.02x. At stabilization the net operating income is $629,801 and coverage is 1.11x. The Year 1 shortfall sits inside the assumed $200,000 working capital reserve, which a lender would want funded at closing and controlled.

Operating expenses barely move with occupancy in the table (from $1,579,611 in Year 1 to $1,590,344 at stabilization), because the Utah staffing minimums do not scale down with vacancy. The ramp also assumes no rate growth, so the 5.3 percent year-over-year growth NIC MAP reports for in-place rates in June 2026 ^[16] is not in the numbers.

Decision. The study would underwrite revenue at collected rates held flat, place realized rate growth in the sensitivity rather than the base case, and require a reconciliation of the seller's trailing revenue to the assumed Year 1 figure before accepting the ramp.

Debt Service Coverage and Sensitivity

At the assumed stabilized occupancy, with every cost line at its assumed value, the facility covers its 7(a) debt service 1.11 times, and the debt table prints a stabilized coverage below the 1.25x minimum.

The operating statement shows total labor of $1,074,918, which is 45.6 percent of revenue, and a net operating income margin of 26.7 percent after an assumed 5.0 percent management fee and an assumed $500 per unit replacement reserve. The labor figure is built from assumed inputs: 64 assumed direct-care hours a day at an assumed blended wage of $19.50, 32 assumed support hours a day at an assumed $17.00, three assumed salaried positions, and an assumed 22.0 percent burden for payroll taxes and benefits. None of those wages is sourced; the Utah Department of Workforce Services industry brief could not be retrieved for this example. The 26.7 percent margin sits inside the range NIC reports for assisted living in 2025, between a negative lower quartile and an upper quartile above forty percent ^[7], and NIC's observation that labor remains the largest expense in senior housing ^[6] is borne out by the statement.

Under 13 CFR 120.212(b) the term of a 7(a) loan is ten years or less except where the loan finances real estate or long-lived equipment ^[37], and under 13 CFR 120.212(c) the maximum term is 25 years including extensions ^[36]. The model splits the loan by cost share: the debt table shows a real estate portion of $4,111,476 amortizing over 25 years with annual debt service of $431,062, and a business assets and working capital portion of $888,524 amortizing over 10 years with annual debt service of $137,967, for total annual debt service of $569,029 on the requested loan. The rate is 9.50 percent, built from a prime rate of 7.00 percent reported in the Federal Reserve's H.15 release for November 2 to 6, 2026 ^[34] plus an assumed lender spread of 2.50 percent, inside the 3.0 percentage point ceiling over the base rate for 7(a) loans of more than $350,000 ^[35]. The base rate for a variable 7(a) loan is the prime rate or the Optional Peg Rate ^[33].

The lower half of the debt table runs two tests. The projected test sets the stabilized net operating income $81,485 below what the assumed 1.25x minimum requires, and the stabilized net operating income supports a loan of $4,427,197 at that minimum. The historical test follows the acquisition rule the site's program page states ^{[2] [3]}: it runs the seller's last fiscal year through the same normalized statement, management fee and reserve included, at an assumed 82.0 percent occupancy, the occupancy the buyer inherits and the same level as the ramp's Year 1. That year earns net operating income of $487,798, a coverage of 0.86x on historical earnings, and the earnings support a loan of $3,428,981 at the floor, which equals the assumed 1.25x lender minimum.

The supported loan is the smaller of the two, $3,428,981, so the historical test binds. The guaranty fee recomputed on that loan is $93,940, the total project cost at that loan is $5,853,940, and the equity at that loan is $2,424,959. The fee shrinks with the loan, so equity is stated at the supported loan with its own fee rather than against the cost of the requested loan.

The sensitivity table shows how little cushion the base case has. A 10 percent fall in revenue takes stabilized coverage from 1.11x to 0.72x; a 20 percent fall takes it to 0.33x. A 2 point rise in the variable rate lifts annual debt service to $651,409 and takes coverage to 0.97x with nothing else changed, which is the risk of pricing a 25-year real estate loan off prime. A 10 percent rise in operating expenses, the labor case, gives 0.83x. Holding occupancy at the Year 1 level gives 0.86x. Every single-variable stress takes coverage below 1.00x.

The break-even table converts the shortfall into the two numbers a buyer can act on. With fixed operating costs including labor and reserve of $1,452,918 and a contribution of $59,168 per occupied unit per year, the facility needs 34.2 occupied units, or 85.4 percent occupancy, for 1.00x coverage, and 36.6 occupied units, or 91.4 percent occupancy, for the assumed 1.25x minimum. At the assumed stabilized occupancy, average monthly revenue per occupied unit would need to be $5,348 for 1.00x and $5,703 for the assumed minimum. The 91.4 percent occupancy break-even is above the 89.1 percent that NIC reports for the 31 NIC MAP primary markets in the third quarter of 2026 ^[14], so reaching the assumed minimum by occupancy alone would require this facility to outperform the national primary markets. The $5,703 rate break-even is still below CareScout's national median of $6,200 ^[18], so reaching it by rate is at least plausible if the county rate survey supports it.

Decision. The study would report stabilized coverage at 1.11x and historical coverage at 0.86x and would not adjust assumptions to reach the assumed minimum; it would present the supported loan of $3,428,981 from the debt table as the sized loan and the $5,000,000 assumed maximum as the buyer's request.

What the SBA 7(a) Rule and Utah Licensing Require, and How the Study Would Meet Them

This section rests on 13 CFR part 120 and on Utah Administrative Code R432-270 and R432-1, read from the Utah Office of Administrative Rules. The acquisition test rests on the site's own SBA program page, named as such, and the SOP stayed unread.

Eligible borrower. The regulation bars passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired with the loan proceeds, except Eligible Passive Companies under 120.111 ^[41]. An assisted living facility bought by the licensee that operates it is the opposite of a passive business: the buyer holds the Utah license, employs the staff and delivers the care. The occupancy rule for an existing building, under which the borrower may lease up to 49 percent of the rentable property if it permanently occupies and uses no less than 51 percent ^[42], is not strained, because the licensee runs the whole building as its own business.

Acquisition test. The site's own SBA program page puts Initial Acquisitions, Owner Buyouts and ESOPs at 1.25x on historical earnings, the same figure as the assumed lender minimum, and Business Expansions at 1.15x ^[2], and says the last fiscal year or a two-year average must show the 1.25x, since projections cannot meet the floor ^[3]. The page also states that standard 7(a) loans need at least 1.15x business coverage ^[43], but that is the lower bar and this purchase is not an expansion. The study would therefore size the loan on the seller's verified earnings, show the buyer's projection as information only, and ask the seller for the last fiscal year and the prior year so that either the single year or the two-year average could be tested. The seller's occupancy in that year is an assumption here, and a real study would replace it with the seller's statements.

Credit elsewhere. Under 13 CFR 120.101, SBA provides business loan assistance only to applicants for whom the desired credit is not otherwise available on reasonable terms from non-Federal, non-State and non-local government sources ^[44]. Conventional lenders do not generally finance goodwill and working capital on a 25-year real estate schedule, so the test is usually met on its face; the study would record the lender's finding rather than make it.

Why 7(a) rather than 504. A 504 project is built around fixed assets: under 13 CFR 120.120(a)(6), assets financed by a 504 loan must have a useful life of at least 10 years and be at a fixed location ^[45], which leaves the assumed business assets, goodwill and working capital in this purchase outside the 504 structure. Under 13 CFR 120.910(a)(2), a 504 borrower puts in 15 percent or more of project cost for the acquisition, construction, conversion or expansion of a limited or single purpose building or structure ^[46]. The regulation does not list assisted living as a limited or single purpose building, so the example says only that an assisted living building may fall under that clause, not that it does. Either way, 7(a) is the program that can carry the business purchase under 120.202 ^[25] and the working capital under 120.120(b) ^[27] in one loan. The maximum loan amount for any one 7(a) loan is $5 million ^[28], and the example assumes the loan at that maximum.

Utah licensing as a program condition. The Utah rules do what the SBA regulation does not: they define the operating minimums the cash flow must carry. A facility whose residents can exit only with the limited assistance of one person must be licensed as Type II under R432-270-4(3) ^[39], and a facility housing 17 or more residents is licensed as a large assisted living facility under R432-270-4(8) ^[13]. The licensee must ensure that qualified direct-care personnel are on site 24 hours a day to meet each resident's assessed needs under R432-270-8(1) ^[22]; at least one certified nurse aide must be on duty in a Type II facility 24 hours a day under R432-270-14(6) ^[23]; and a Type II licensee must hire or contract with a registered nurse to provide or supervise nursing services under R432-270-14(3) ^[24]. The model's staffing inputs are built to those minimums, with the assumed $92,000 registered nurse salary funding the required nursing supervision. A signed and dated resident assessment is required before admission and at least every six months thereafter under R432-270-12(1) ^[47]; those assessments are how a study would verify the care-level mix behind the assumed care charge.

Change of ownership. R432-1-8(3) requires a fire clearance and a local health department food service sanitation clearance upon a change of ownership ^[10]. The study would put both on the closing checklist ahead of the SBA authorization.

Decision. On the cited rules the study would find the purchase an eligible use of 7(a) proceeds, resting on the buyer being the operating licensee, and would keep that finding apart from the credit finding: eligible, yet sized below the request because the historical test binds.

Risks

Labor cost and staffing minimums. Labor is 45.6 percent of revenue in the operating statement, and every wage in it is assumed because no Utah series could be sourced. The Utah rules fix the floor: direct-care personnel on site 24 hours a day ^[22], a certified nurse aide on duty 24 hours a day in a Type II facility ^[23], a registered nurse hired or contracted ^[24]. NIC's finding that labor is the largest expense in senior housing and can weigh on net operating income even as revenue grows ^[6] describes the sensitivity case: expenses up 10 percent gives 0.83x.

Residents aging out. Type I and Type II licensees may not provide skilled nursing care ^[40], and the rule bars admitting or keeping a person who requires 24-hour continual nursing care that will last longer than 15 calendar days ^[48]. Each such resident is a discharge and a vacancy; the study would test historical move-out reasons and length of stay.

Licence transfer at closing. The change-of-ownership clearances under R432-1-8(3) ^[10] are a timing risk: a gap between closing and the new license would leave the buyer unable to lawfully operate the building, so funding would wait on the license.

Rate discounting. NIC MAP initial rates sit 9.4 percent below asking rates ^[17]. The break-even table says the facility needs $5,348 of average monthly revenue per occupied unit for 1.00x at the assumed stabilized occupancy; a new owner who fills units with concessions of the size NIC MAP reports would be filling them below the line.

New supply. NIC MAP's 0.4 percent year-over-year national inventory growth ^[15] says nothing about the county, where residents grew from 180,284 to 213,670 ^{[8] [9]}; that growth attracts developers, so a county pipeline search is required.

Variable rate. The interest on a floating 7(a) loan follows either the prime rate or the Optional Peg Rate ^[33], which leaves the borrower exposed to rate moves: the sensitivity table prints coverage of 0.97x for a rate up 2 points.

What Would Decide the Outcome

Both coverage tests fall short of the assumed 1.25x minimum, and the historical one binds, so the question is what would have to be true for the requested loan to work. The projected test does not decide the loan, because the site's page states that projections cannot meet an acquisition floor ^[3]; the levers below therefore matter first as evidence about the seller's history and second as support for the ramp.

Occupancy. The facility needs 91.4 percent occupancy for the assumed 1.25x minimum, against an assumed stabilized occupancy of 88.0 percent and NIC's reported 89.1 percent for the 31 NIC MAP primary markets in the third quarter of 2026 ^[14]. If the county supply survey and the facility's own history show 91.4 percent or better sustained by comparable Type II facilities in Washington County, the loan can be sized as requested; if the county runs at or below the national figure, it cannot be sized at the assumed maximum on occupancy alone.

Rate. At the assumed stabilized occupancy the facility needs $5,703 of average monthly revenue per occupied unit for the assumed minimum, against an assumed $5,500. The gap between those two figures is smaller than the $660 initial-rate discount NIC MAP reports nationally ^[17] and well inside the distance to CareScout's $6,200 national median ^[18]. Realized rate growth of the kind NIC MAP reports, 5.3 percent for in-place rates in June 2026 ^[16], would close the gap if costs did not follow, but the base case does not count on it.

Price and equity: the restructure. The restructure keeps the price, every cost line and the 7(a) terms, and cuts the loan to the debt table's supported loan of $3,428,981, rounded down to $3,420,000 (Table 11). Under the same statutory fee rule the guaranty fee on that loan is $93,688, total project cost becomes $5,853,688 and the buyer's equity $2,433,688, or 41.6 percent of cost, which is $1,535,563 more than the request leaves the buyer to fund. Annual debt service falls to $388,139, and coverage reaches 1.62x on stabilized earnings against the assumed 1.25x lender minimum and 1.26x on the seller's last fiscal year against the 1.25x floor on the site's own SBA page ^[2]: the restructure passes both tests, the historical one by only $2,624 a year. A buyer who cannot fund that equity has one other lever, a lower price, negotiated against the seller's verified statements.

Rate and wages. A 2 point rise in prime takes coverage to 0.97x in the sensitivity table, and a 10 percent rise in operating expenses, which is mostly labor, takes it to 0.83x. The study would set a rate-cap or fixed-rate condition and replace the assumed wages with a local survey before sizing; wages above the assumed $19.50 and $17.00 make every other lever work harder.

Decision. The study would recommend the restructured loan of $3,420,000 in Table 11, the supported loan of $3,428,981 rounded down, which the seller's last fiscal year carries at the floor. It would revisit the $5,000,000 request only if the seller's verified earnings, not the county surveys alone, came in above the assumed 82.0 percent year, and then only with a funded reserve and a rate-protection condition.

Questions to Ask a Feasibility Study Company: FAQ

Does the SBA require a feasibility study for an assisted living purchase? Not in every case; the rule is permissive. 13 CFR 120.160(b) allows SBA to impose, as conditions of a loan, professional appraisals, a survey or a feasibility study ^[5]. For a purchase below stabilized occupancy, where the credit depends on a ramp the seller's statements do not show, a lender would be likely to order one regardless.

Is assisted living an eligible 7(a) use, given that residents live in the building? Yes, where the borrower is the operating licensee. The exclusion in the regulation targets investors, such as developers and landlords, who neither occupy nor actively use what the loan buys ^[41]; a licensed care operator that staffs the building 24 hours a day under R432-270-8(1) ^[22] is actively using it.

Why is coverage below the minimum in both tests when the price is so far below market cap rates? Because 7(a) pricing and the loan split make the debt expensive relative to the income. The real estate portion amortizes over 25 years under 120.212(c) ^[36], but the business and working capital portion is held to ten years under 120.212(b) ^[37], and the variable rate is prime plus a spread ^[33]. At the cost table's 84.8 percent loan to total project cost at the requested loan, the debt table's $569,029 of annual debt service absorbs most of the $629,801 stabilized net operating income; lower leverage is the direct fix.

What would a lender want to see that this worked example does not have? A county supply and rate survey, the seller's trailing statements and payroll by position, the resident assessments under R432-270-12(1) ^[47] that confirm the care-level mix, the current SBA fee notice, and the change-of-ownership timeline under R432-1-8(3) ^[10].

How should a buyer choose a feasibility study company or consultant for a deal like this? Ask how the firm handles a base case that fails the lender's minimum. A consultant who adjusts assumptions until the coverage clears is not protecting the buyer. The right answer looks like this example: report the base case as it falls, show the break-evens and the loan the cash flow supports, and let the buyer decide between more equity, a lower price or a stronger market case.

Why is the loan sized on the seller's year and not on the buyer's projection? Because a purchase has to show 1.25x on past earnings, the same figure as the assumed lender minimum, and the site's SBA page says a forecast cannot meet that floor ^{[2] [3]}. The page is the only source the example uses for the rule; the SOP stayed unread.