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Senior Care Business Financing: How to Apply
September 22, 2021
Senior Care Business Financing

Senior Care Business Financing: How to Apply

Revenue in the senior care industry declined sharply in 2020 due to COVID-19. While the worst of the pandemic seems to be over, challenges remain. In particular, many providers are grappling with severe labor shortages.

Yet an aging population and an ever-increasing average life span mean the industry’s long-term fundamentals are promising. To get through the short-term struggles and capitalize on future growth, senior care entrepreneurs are turning to financing.

Senior care business loans, credit lines, and cash advances are all viable options depending on the situation. To help you choose the right financing option for your business, we’ll review popular options and common uses of funds for senior financing. Then we’ll summarize how the application process works.

What to Consider Before You Apply for a Senior Care Business Loan

If you’re struggling to fund key business operations, it can be tempting to rush into the application process. However, it pays to take your time, explore your options, and research lenders before you apply.

Here are several popular senior care lending solutions that business owners should keep in mind:

1. Traditional small business loans or credit lines

Traditional loans and credit lines offer fairly large amounts for competitive rates. However, to qualify, you’ll need excellent credit and a long track record of business success. Yet even with strong finances, the application and funding process can take months to complete.

2. Senior care business financing from an alternative lender

Alternative lenders may specialize in senior care financing or they may offer more generic small business loans or lines of credit. In either case, financing from alternative lenders is typically more expensive than traditional financing. However, alternative lenders have more lenient qualification criteria and fund your loans much faster compared to traditional lenders.

3. Small Business Administration (SBA) and HUD Loans

SBA loans are originated and serviced by SBA-approved banks and guaranteed by the SBA. You can use SBA loans for almost any expense related to operating your business. SBA guarantees make these loans very affordable, but the application process is highly competitive.

The U.S. Department of Housing and Urban Development (HUD) provides what are called HUD loans. Compared to SBA loans, the use of funds for these loans is more restrictive. Through the HUD 232/223(f) loan programs, you can pay for the construction, acquisition, and renovation of senior living facilities (such as nursing homes or assisted living communitieshttps://www.hud232.loan/hud-232-loan-types).

4. Equipment Loans

If you’re looking for senior care business financing to cover the cost of equipment, equipment loans are a great option. With an equipment loan, the equipment you purchase serves as collateral on the loan. This collateral helps reduce the cost of the loan and makes it easier to qualify for. Of course, the one drawback is that you can only use equipment loans to pay for equipment.

5. Invoice Factoring

Payment delays can be a major obstacle to healthy cash flow, especially in the senior and home care industry. Invoice factoring aims to solve this problem by enabling you to sell your invoices at a discount for a cash advance. The discount rate, also called a factor, depends on the factoring company. Typically, invoice factoring is used as a short-term financing tool.

How to Apply for a Senior Care Business Loan

Depending on the loan and lender, the process of applying for a senior care business loan may vary. For instance, with a HUD loan, you’ll have several steps related to property appraisal, insurance, and construction that you wouldn’t face with an equipment loan.

That said, you can generally expect to fill out an application, provide personal and business records, and share financial information. You will be asked for documents such as:

  • Financial Statements
  • Credit Reports
  • Legal Documents

Depending on the lender, you may also need to prepare and submit a business plan with your application. For more specifics on the application process, we recommend checking with individual lenders. You can also read our guide to applying for a small business loan for general application guidance.

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How to Use Senior Care Financing

Whichever financing options you choose, senior care financing isn’t cheap. So using the funds you receive wisely and getting a return on your debt is critical. If you’re struggling to recruit and retain quality staff, that may be the place you start. However, the best use of your funds also depends on your business’s needs.

We suggest taking your time in deciding how to deploy your small business financing. If you’re stuck or need help starting your brainstorm, a few ways you can spend a senior care business loan include:

  • Property acquisition or refinancing
  • Facility renovations
  • Equipment upgrades
  • Job advertisements and compensation packages
  • Insurance
  • Payroll and inventory
  • Rent, utilities, and/or taxes

Is Senior Care Business Financing Right for You? 

If you don’t have the cash you need to operate or grow your senior care business as effectively as you can, medical business financing is worth considering. While you will incur fees and interest expenses, you should earn a sufficient return on your debt to make up for it. Of course, that depends on your ability to deploy your funds in both a timely and efficient manner.

Therefore, the key is finding senior care financing that doesn’t cut too far into your profits and fits your timeline. With both those criteria met, senior care business financing can be just the thing you need to help your business thrive.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].