SBA Loans for Home Care Agencies: Financing an Existing Agency Purchase
Most of a home care agency’s value lies in its cash flow, client relationships and caregiver team rather than in buildings or equipment. That makes conventional collateral-based lending a challenge for many buyers. SBA-backed financing, which can allow longer repayment terms and lower down payments than some conventional loans, is often considered for these purchases. SBA loans for home care agencies may be used to acquire an existing, operating agency with an established track record.
This guide covers financing the purchase of an existing non-medical home care agency, such as a personal care, companion care or homemaker-services business. It does not address starting a new agency, and it does not cover skilled home health or other clinical providers. SBA eligibility depends on current program requirements, the facts of the transaction and lender review, so confirm current requirements with your lender.
How SBA Lending Works
SBA loans are made by participating lenders and partially guaranteed by the U.S. Small Business Administration. The guarantee reduces the lender’s risk, which can make it possible to finance goodwill-heavy acquisitions with longer terms than many conventional business loans. Borrowers must meet the lender’s credit standards and SBA eligibility requirements.
How SBA 7(a) May Be Used
Depending on eligibility and lender approval, SBA 7(a) financing may be considered for:
- Purchasing an existing agency, including goodwill and business assets
- Working capital as part of the acquisition, which can help cover payroll during the transition
- Certain closing costs
Licensing and Program Considerations
Lenders generally want assurance that the agency will be able to keep operating after closing. Depending on the state and any payer program participation, that may involve licensing, change-of-ownership approvals or program requirements, which vary and are not guaranteed. Funding may be coordinated with these steps. See our guide to home care agency change of ownership.
Equity Injection and Seller Notes
SBA acquisitions generally require a buyer equity contribution. Depending on current SBA rules and lender policies, a seller note may count toward part of that requirement under certain conditions. Our article on buying a business with 5% down using SBA financing explains how seller notes may be treated, and our guide to home care agency seller financing covers seller notes and contingent payments in home care transactions.
What SBA Lenders Look At
- Documented cash flow: tax returns and financial statements that support the price and loan payments
- Revenue support: scheduling and billing reports and bank deposits that align with reported results
- Payer sources: the mix of private pay and any third-party payers, and collection history where applicable
- Concentration: dependence on a few clients or referral sources
- Workforce: caregiver stability and key office staff
- Buyer experience: management, healthcare-related or business ownership background and an operating plan
- Credit, liquidity and guarantees: as required by the lender and program
Our guide to home care agency loan requirements explains underwriting in more detail.
Franchised Agencies
If the agency operates under a franchise, the franchisor may need to approve the buyer and transfer, and lenders may review the franchise agreement. Requirements depend on the franchise system and current program rules.
Preparing Your Request
- A letter of intent or purchase agreement
- Seller tax returns and financial statements for several years
- Scheduling and billing reports and bank statements
- Revenue by payer source, where applicable
- Workforce information and your retention plan
- Licensing information and your plan for any required approvals
- Your personal financial statement, tax returns and resume
- A business and transition plan
Estimate payments with our SBA loan calculator.
Is SBA Financing the Right Fit?
SBA financing can be a strong option for many home care acquisitions, but it is not the only one. Some buyers with strong credit and larger down payments consider conventional financing, and many deals combine bank and seller financing.
US Professional Funding helps buyers evaluate SBA and conventional financing for the acquisition of existing non-medical home care agencies. Learn more about our home care agency acquisition financing.
