SBA 7(a) Continuing Care Retirement Community Feasibility Study

Small 7(a) loans for continuing care

Continuing care retirement communities account for 130 SBA 7(a) loans and $102.6 million over FY2017 to FY2026. Their median, $350,000, and a middle band from $100,000 to $963,075 are small sizes for a care campus, which suggests most of these loans fund working capital, equipment or an operator's purchase rather than construction. The trend has thinned: 30 loans and $34.9 million in FY2017, 5 in FY2020, and 11 in FY2026 for $8.5 million. No figure here is far enough from 7(a) overall, or from continuing care across both programs, to register as distinct.

The loss record is the warning

For the 70 continuing care loans disbursed across FY2017 to FY2021, charge-offs stand at 7.1% or more, and 5.7% came within five years; the damage, in short, came early. That is a high floor for senior care, and the cohort is small enough that a few loans move it, but a lender should not dismiss it. Cancellation is 12.7% at both floor and ceiling, which means every approval in that window has either funded or been cancelled.

The Huntington National Bank leads with 11 loans for $3.1 million. Celtic Bank Corporation has 5 for $5.3 million, and no other lender in the file reaches that many. California has 12 loans, Texas 11, and Florida and Michigan 9 each. Franchise share is 3.1%. The coding needs care: independent living has no code, and the code used here also covers assisted living with nursing on site, so some loans in this cell are assisted living, not continuing care.

What a continuing care study must test

A feasibility study for a 7(a) continuing care loan has to test demand among older households with the wealth to pay entrance or monthly fees; the operator's staffing and cost structure; debt service coverage in the early years, where this cell's losses concentrate; and, for any real estate, an appraisal that separates the campus from the business that runs it. Where the loan funds an operator buying an existing community, the study should also test the resident contracts it inherits and the reserves behind them.