SBA 504 Skilled Nursing Feasibility Study

Skilled nursing 504 loans are large

Skilled nursing is a small 504 class: 178 loans and $276.6 million over FY2017 to FY2026. What our screen flags is the median loan, $1.1 million. That median sits well above the skilled nursing median across both SBA programs and apart from the 504 program's typical loan. The middle half falls between $531,250 and $2.1 million, the range of a facility purchase or a substantial expansion rather than an equipment loan.

Approvals climbed from 8 in FY2017 to a peak of 28 in FY2023, when dollars hit $51.0 million, and FY2026 brought 26 loans and $42.8 million. The Mortgage Capital Development Corporation leads with 22 loans and $37.4 million, with Mountain West Small Business Finance almost level on dollars at $37.1 million from 19 loans. Florida First Capital Finance Corporation, Inc. follows at 11 loans and $23.9 million, and Midwest Business Finance Corporation and Business Finance Capital hold 8 each, for $13.3 million and $10.0 million. California leads with 35 loans, then Minnesota with 17 and Texas with 13; Arizona and Florida have 11 each, and Montana has 8. Franchise share is 3.4%.

High fallout, no recorded losses

Nursing projects approved in FY2017 through FY2024 carry a 17.3% cancellation floor and a 21.1% ceiling: a substantial share of them never close. Licensing approvals, change-of-ownership filings and appraisals of operating facilities all sit between approval and funding, and any of them can end a deal. Among the 47 loans disbursed in FY2017 to FY2021, none shows a charge-off, a floor of 0.00% and 0.00% within five years; on a cohort that small, a zero floor is thin evidence either way.

What a skilled nursing study must test

The industry code also holds inpatient hospices and assisted living with nursing care, so not every loan here is a skilled nursing facility. A feasibility study for a 504 skilled nursing project has to test demand from the residents most likely to need post-acute and long-term care, hospital discharge patterns and competing beds; staffing cost, which sets the margin; the payer mix among Medicare, Medicaid and private pay, with reimbursement risk tested; debt service coverage at the occupancy the operator has achieved; and the appraisal, which in this class must allocate value among real estate, the operating business and the licenses, since the 504 lien reaches only the first.