senior care lending

Senior Care Lending: Common Misconceptions of SBA Loan Programs

Live Oak Bank entered the Senior Care lending space understanding that certain government assisted loan programs are not widely understood by many industry participants.  Part of Live Oak Bank’s mission is to educate the senior care industry regarding creative uses for the SBA loan programs.  We believe, as product knowledge and awareness improve, these government assisted loans will play a key role in the growth of the industry.  Particularly important, is the ability of Live Oak Bank’s programs to support emerging companies, entrepreneurs, and future leaders of the sector.  We all start small…let Live Oak Bank’s SBA loan programs help you grow.


Myth #1:  SBA Loans are limited to $5MM or less.

There is more to the story.  The SBA will guaranty 75% of a bank’s exposure on a 7a loan up to a maximum loan amount of $5MM.  Many SBA lenders choose not to fund loans exceeding $5MM, and therefore often advertise a loan limit of $5MM for SBA 7a loans.

Live Oak Bank, on a case by case basis, will differentiate itself by making SBA 7a loans exceeding $5MM, foregoing the SBA guaranty on the additional loan proceeds.  In addition, Live Oak Bank offers SBA 504 loans, which are designed for larger projects secured by hard collateral (such as real estate).  Live Oak Bank offers SBA 504 loans up to approximately $17MM.


Myth #2:  I don’t need a long-term loan.  I want to go to HUD once I stabilize my project.

We understand the critical role that HUD plays in providing long term fixed rate financing to the assisted living, memory care, and skilled nursing segments of the senior care industry.  The SBA 7a program often serves as a bridge loan option, offering attractive leverage with flexible prepayment.  Prepayment fees decline over a three year period, and are eliminated in the fourth year…a perfect timeline for a light value-add acquisition, a renovation or expansion project, or a new construction project.  Also, because SBA loans are long term without balloon payments, you have ultimate flexibility in the event your HUD loan is delayed or your business plan needs adjusting.


Myth #3:  I can get a better deal elsewhere.

Perhaps.  Choosing a loan program and lender is specific to your situation.  Many factors should be considered, including certainty of execution, loan term, loan covenants, industry expertise, ongoing level of service, and reporting requirements.  SBA loans are highly desirable for the leverage they offer, the longer term, and for their simple ongoing requirements.


Myth #4:  The SBA loan application process is too complicated and cumbersome.

Live Oak Bank is not the antiquated SBA lender of yesteryear, in fact we are quite the opposite.  Live Oak Bank was built around technology designed to transform and simplify the client’s borrowing experience.  Yes…SBA loans have extensive documentation requirements.  Live Oak Bank, however, has digitized and streamlined the SBA application process through its proprietary technology platform.  As a borrower you will have the ability to submit documents through an online portal, view the status of your loan application in real time, and respond to digital requests from your lending team.  Our technology backbone makes our lenders more efficient, our decision making faster, and provides for a superior customer experience.

And the great news… SBA loans are largely hands-off once closed, so you can focus on your day job—caring for your residents and growing your business.


Myth #5:  A government loan program?  That has got to be slow!

We recommend working with an SBA lender who is part of the SBA’s Preferred Lender Program (PLP).  A PLP lender will be qualified to determine eligibility upfront and properly structure the loan.  The PLP status gives the lender delegated authority to approve the loan on behalf of the SBA, avoiding the additional time and uncertainty surrounding submission of the loan application to the SBA for approval.  SBA loans without real estate can close within 60 days, SBA loans with real estate can close within 90 days.  At Live Oak Bank, our systems and processes have been purposefully designed to eliminate time waste.  In this competitive financial services industry, here at Live Oak Bank we like to say that “SPEED IS OUR WEAPON”.


Myth #6:  SBA Loans are too expensive.

Both tangible and intangible factors should be considered when comparing and evaluating pricing.  SBA programs are truly unique, offering long term loans without balloon payments or financial performance covenants, providing you with the timeline and flexibility you need to execute your business plan.

Frequently SBA loans offer a high leverage option, where conventional capital structures may require you to take on a more expensive junior loan or additional equity.  Working with a single capital partner can reduce complexity and improve certainty of execution.  Utilizing reasonably priced SBA debt to expand your senior care business may allow you to avoid the dilutive impacts of outside equity or high-cost junior lenders.


Myth #7:  SBA Loans are all the same, it doesn’t matter who my lender is.

This could not be further from the truth.  While all lenders must adhere to the SBA’s program guidelines and underwriting standards, the experience of working with different lenders will vary widely.

SBA loan programs may be utilized for thousands of types of businesses, therefore many SBA lenders are often generalists, working across many industries.  We recommend selecting an SBA lender who offers expertise within your industry.  If your lender understands and speaks the language of your industry, you are more likely to have a collaborative relationship.  The lender’s industry expertise will also benefit you throughout your loan servicing relationship, especially while working together to overcome unforeseen challenges that may arise over the term of the loan.


Myth #8:  I already have several locations and a growing track record.  I must be too big for SBA. 

SBA does prohibit borrowers that are “too large” from participating in their programs.  There are multiple tests that can be used to qualify a SBA borrower.  The limitations on eligibility are much less stringent than most assume.


Please contact Live Oak Bank for a discussion regarding your program eligibility and to receive a prequalification for your next senior care lending need.

Adam Sherman is the industry expert with the senior care lending division at Live Oak Bank. Reach him at