Navigating Assisted Living Facility Requirements: Meeting Regulations and Expectations

assisted living requirements must be met

A 2017 study sponsored by the American Association of Retired Persons and other nonprofit organizations found that the quality of long-term care in the United States was getting better overall, although it was “uneven, slow progress.” In the study, California was ranked ninth out of the 50 states and Washington, DC for care services, scoring above the national average for all quality of life and quality of care indicators.

The authors of the study expressed concern that there would be a serious shortage of facilities within the next decade “when the boomers begin turning 80.” This should be a call to action for owners of assisted living facilities who are thinking about expanding. Expansion is often a sound decision for assisted living businesses, and there is more to motivate it than simply meeting demand. The assisted living industry is in transition due to a number of simultaneous processes. Increasing demand is only one of them.

If you are a Californian small business owner in this field,  you are most likely aware of the rapid growth of the assisted living market. Those wanting to remain competitive in the field and also compliant with regulations should familiarize themselves with the Small Business Administration (SBA) 504 loan. Its advantageous terms can help you expand your reach in this competitive market.

The Emerging New Paradigm of Care

Not only are their numbers increasing, residents of care facilities are becoming more demanding and showing more complicated needs. As a result, the distinctions between independent living facilities, assisted living facilities and nursing homes are becoming blurred. Assisted living facilities are being stretched in both directions, providing more options to enhance quality of life that had previously only been features of independent living and support services or nursing homes.

Analysts say that, in this complex and competitive market, small facilities are being squeezed out by larger operators. The reasons for this are purely economic: assisted living facilities have high fixed costs, and it is more profitable to spread them across a larger operation. This is one reason for small business owners to expand facilities. Also, besides providing more beds, new construction fills the common need to make cosmetic enhancements to campuses and allows owners to equip the facilities with modern technology. All this creates a more inviting and convenient atmosphere that meets the greater demands of today’s residents. As industry expert Jim Moore put it, the business is becoming more sophisticated.

The changing situation puts pressure on state regulators as well. Federal regulations cover only facilities that accept Medicaid and Medicare, leaving it to the states to control the majority of care facilities alone. The AARP has shown the efficacy of state regulation in maintaining quality of care, but Moore has noted that state regulations may lag behind industry trends.

Meeting state regulations is not simple. You will need to show your market research to justify your decision to build at a specific location, and you may need engineers, architects or lawyers to support your findings. Once your building is completed, it will have to pass fire and health department inspections and conform to other codes. Finally, your administrators and staff will need to meet minimum training requirements.

Funding the Expansion of Your Care Facility

Thankfully, there are appealing financing options for expansion that will help you up your competitive edge and stay on top of regulation requirements. Banks are generally willing to work with assisted living businesses and they are particularly willing  on 504 loans since it means less risk for the bank. A 504 loan is a partnership between a conventional lender, a Certified Development Company (CDC) and the borrower. It has three parts:

  • The first is a loan from a conventional lender for at least 50% of the total amount. You and that lender determine the amount and conditions of that loan, which becomes your first mortgage.
  • Your CDC facilitates a separate SBA loan of 40% of the total, up to $5 million, at a fixed, below-market rate. You can receive up to $5.5 million for projects eligible for the SBA’s Green Energy Program. This will be your second mortgage.
  • Then you, the borrower, will contribute 15% to the loan as collateral. This is the rate set by the SBA for single-purpose properties.



  • 50% Conventional lender
  • 35% CDC
  • 15% Borrower

The 504 Program, created to help small business owners grow, will provide you the financing you need with affordable terms. The loan features a down payment requirement of only 15%, a long-term, below market fixed interest rate, and no additional collateral required.  Funds from a 504 loan can be used for:

  • Acquisition of an existing building
  • Building expansions or renovations
  • Equipment
  • Land and new construction
  • Refinancing non SBA debt

You will find it helpful to prequalify for your 504 loan. Prequalifying is not the same as applying, but it will give you an idea of what to expect from a 504 loan. Knowing in advance how much down payment your loan may require, what your spending capacity is and how much total financing you may receive will give you an advantage in discussions with property sellers, contractors and city agencies. Prequalification usually takes 48 hours or less, and TMC Financing averages 18 hours.

The SBA Green Energy Program is often a good fit for assisted living facilities as well, since they tend to consume large amounts of energy. Borrowers can qualify for the program by:

  • Buying or constructing a building that consumes 10% less energy than your current location
  • Buying the building you now lease and making upgrades to consume 10% less energy
  • Buying or constructing a building that produces 10% of the energy it consumes or produces fuel to reduce fossil fuel consumption, using equipment financed through the loan

The Green Energy Program allows the borrower to exceed the traditional project limit on SBA funding. Since it results in significant energy savings for the building owner, it saves the business money as well.

You can find out more about how a 504 loan can help you finance the expansion of your assisted living business by talking to one of TMC’s 504 loan experts. TMC Financing is a leading CDC in California and Nevada. Contact TMC today for more information, to prequalify for a 504 loan or to begin the 504 loan application process.


Bruce Whitaker is Senior Vice President of Business Development for TMC Financing, focused on serving small business clients throughout San Francisco’s South Bay. With over 17 years of SBA 504 lending industry experience, Bruce helps small and medium sized businesses become owners of the buildings from which they operate their business. Through education and consultation, he is able to provide optimal financing that allows business owners not only to control their occupancy costs but also control their destiny. Often, the building that is purchased for the business owners’ operations becomes an income source in retirement.
Bruce Whitaker