SBA 7(a) Skilled Nursing Feasibility Study

Skilled nursing 7(a): operators more than buildings

Skilled nursing borrowers took 543 SBA 7(a) loans and $573.6 million in FY2017 to FY2026. Our screen flags the median loan, $500,000: it is well below the class median with 504 building loans included, and it also departs from what 7(a) lends across all classes. The middle half stretches from $150,000 to $1.4 million, which fits operators buying a business, funding working capital through reimbursement lags or upgrading a facility, with fewer loans buying the building itself.

Low losses, stubborn cancellations

The charge-off floor is 0.94% for the 213 nursing loans funded in FY2017 to FY2021, and 0.47% inside five years, low for a business with thin margins. Cancellation is higher, no less than 16.1% of the nursing approvals from FY2017 to FY2024 and possibly 17.2%: change-of-ownership approvals, licensing and a lender's diligence on inspection history can each stall a deal after approval. For a borrower buying an operating facility, the approval date is only the start of a regulatory calendar that the closing has to wait on.

Celtic Bank Corporation leads with 61 loans and $130.9 million, far ahead on dollars. The Huntington National Bank has 43 loans for $17.5 million, Columbia Bank 24 for $14.2 million, Wells Fargo Bank National Association 17 for $3.5 million and Northeast Bank 16 for $3.1 million. California has 112 loans, Washington 40, Minnesota 36, and Michigan and Texas 33 each. Approvals peaked at 78 in FY2023; dollars peaked at $87.6 million in FY2021; FY2026 brought 45 loans and $65.6 million. Franchise share is 2.2%.

What a nursing study must test

Inpatient hospices and nursing-equipped assisted living share the code and cannot be pulled out, so the record is broader than skilled nursing alone. A feasibility study for a 7(a) nursing loan has to test demand from hospital discharges and the local supply of beds; the payer mix and the state's Medicaid reimbursement; staffing and agency labor cost; debt service coverage at the census the operator has actually run; and an appraisal that separates real estate, the business and the license, since an operator loan may rest more on cash flow than on property.