In 2014, there were 46 million Americans aged 65 or older. This number is expected to approach 100 million by 2060. Over the next 40 years, our nation will face significant challenges caring for the elderly. This will impact everything from medical insurance to old-age and long-term care facilities.
The elderly already represent 15% of the U.S. population. As baby-boomers exit the workforce and more people move into their golden years, demand for assisted-living facilities will expand manifold.
According to the U.S. government, an aging population could result in “increased demand for assisted-living arrangements or institutional care for couples.”
These trends will be further compounded by higher life expectancy among the elderly. In a 2014 report, the U.S. Census Bureau identified that survivorship past the age of 65 is on the rise. In 2010, Americans aged 65 could expect to live another 19.1 years. That’s up from 15.2 years four decades earlier.
Advances in medicine and technology are not only creating longer life expectancy, they are forcing health suppliers to re-think long-term care facilities. Investors and businesses looking to enter this space need to think long and hard about optimizing assisted-living facilities for the future.
The Red Door Capital Group is helping to secure financing for assisted-living facilities. We work with a variety of regional and national organizations capable of providing interim capital to businesses looking to serve the elderly through long-term care facilities.
In the following sections, we explore financing solutions for assisted-living facilities.
Assisted-Living Facility Loans and Financing
Loans for assisted-living and long-term care facilities typically fall under commercial real estate financing. These types of loans work with the healthcare industry to provide financing for a wide range of facilities, including:
- Independent care centers
- Disability care
- Seniors housing and retirement homes
- Skilled nursing
- Medical office buildings
These types of loans are usually collateralized by commercial real estate, where both the property and business are secured against the commercial mortgage.
Loan terms vary depending on the size and scope of the project, as well as the financial standing of the business or health service provider. Working with Red Door Capital, health suppliers can secure favorable lending terms at each stage of the funding cycle.
For more information about construction financing, check out Red Door’s Real Estate services.
SBA 504 Loan
Assisted-living facilities can also be financed through the Small Business Administration (SBA) 504 loan, also referred to as the Certified Development Company program.
The SBA 504 loan provides financing for the purchase of fixed assets at below-market rates. “Fixed assets” refer to real estate, buildings and machinery. This type of loan is secured through your local Certified Development Company, likely with the assistance of a traditional financial services company.
The SBA is potentially helpful for companies looking for working capital. For large capital projects, this program could provide steady cash flow to complete the project in a timely manner.
The SBA is also helpful in the current lending climate, where many banks are unwilling to lend to special-purpose projects. Under these conditions, the presence of the SBA 504 partner allows the risk to be shared.
At the same time, there are drawbacks to obtaining an SBA 504 loan. For starters, SBA is a government agency, which means you can expect fees and complications from start to finish. Fees might increase. Paperwork and processing times will certainly increase.
To learn more about SBA loans, read the following article: SBA Loans Aren’t For Every Type of Startup.
When it comes to financing essential business functions, health suppliers have several options at their disposal. Capital costs related to specialized technology, lab equipment and furniture can be obtained through an equipment loan.
Equipment financing can help you replace old equipment or buy new ones. The loan usually requires a down payment, and is collateralized against the equipment purchased. In certain situations, leasing the equipment may also be an option.
Red Door Capital also specializes in equipment financing, which can help assisted-living facilities acquire the latest medical technology. To explore equipment financing or leasing options, read the following article: Equipment Financing: What are the Options?
The Future of Assisted-Living Facilities
A rapidly aging population, growing consumer demand and new medical treatments are heightening demand for assisted-living facilities. These trends are likely to intensify, creating plenty of opportunity (and competition) in the assisted-living market.
While it’s easy to paint a broad brush when it comes to seniors, the population is highly diverse. Investors and businesses therefore shouldn’t assume that retirees have the same desire or end goal.
However, a clear trend emerging within the industry is a shift away from institutional living toward alternative lifestyle arrangements. Since baby boomers are known for spending more on leisure activities, health service providers should consider prioritizing hospitality and lifestyle in designing assisted-living facilities.
New retirees are demanding greater community interaction, health and wellness programs and technology.
In response, senior housing providers are developing dynamic environments that provide more hospitality features and convenience. This means larger residential units, restaurant-style dining and social events.
In terms of mobility and healthcare trends, seniors want mobility. The assisted-living facility of 2017 and beyond must prioritize the use of technology to reduce long-term stays and provide specialty care, especially for people with disabilities.
Red Door Capital is currently working with several assisted-living facility providers. Our services help businesses construct new facilities and purchase existing ones for renovations. We work with housing and urban developers as well as private investors to obtain optimal financing solutions. To see how we go beyond traditional lenders, read: Are Traditional Loans Hurting Your Non-Traditional Lending Needs?
If you’re looking to build a business serving the elderly, contact us today.
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Administration for Community Living. Aging Statistics.
Rich Grant. “Assisted living: A new avenue for SBA 504 lending.” TMC Financing.
Carol Marak. Trends in the industry: Evolving Trends in the Assisted Living Industry. AssistedLivingFacilities.org.
NIC (April 12, 2017). Seniors Housing Occupancy Falls to Lowest Rate Since Mid-2013.
United States Census Bureau (April 15, 2016). FFF: Older Americans Month: Ma 2017.