Investors use bridge-to-HUD loans to avoid the long delays associated with U.S. Department of Housing and Urban Development (HUD) origination. HUD financing is becoming increasingly attractive for residential healthcare investors, owners and operators, but due to the delays, a bridge loan may be a great option.
Bridge loans are used in the multifamily, construction, and healthcare sectors, among other areas. Bridge loans allow owners and operators to finance projects in the short term with current funds while working towards a permanent financing plan with HUD. Bridge loans have a quick turnaround, sometimes ninety days or less.
HUD-insured loans take time, and many owners and operators need bridge financing to have funds available for the acquisition or substantial rehabilitation of a residential healthcare facility. HUD-insured loans are often the lowest fixed rate options, with a 35-year fixed rate fully amortized loan term.
Bridge financing allows a residential healthcare facility to stabilize expenses. In addition, the investor can refine the payor mix so the proper debt amount can be fully supported when the lender underwrites the facility to HUD guidelines.
The lender will underwrite the bridge financing based on the existing cash flow. The bridge loan terms and conditions will ensure that it meets HUD refinance standards. The bridge lender will also ensure that all debt is HUD eligible.
Bridge Loan Options
LSG Lending has relationships with HUD and LEAN-approved lenders that understand and have experience with various asset types, including nursing homes, assisted living facilities, and memory care communities.
When considering lenders for bridge loans:
- Discuss with the lender their experience with bridge-to-HUD financing and that they understand the requirements of a HUD refinance.
- Ensure the LTV (Loan-To-Value) is at a certain percentage to ensure an exit from the bridge financing into a HUD-insured loan.
HUD lenders can set up the bridge financing and ensure that the requirements of the HUD program are met while construction or repairs to the healthcare facility are completed.
It can be very costly to do major repairs to a facility and later find out that they do not meet the criteria for HUD later.
What is a LEAN Approved Lender?
HUD-approved lenders undergo an extensive review process to participate in HUD healthcare loan programs. Lenders approved to arrange loans for skilled nursing, assisted living, and memory care communities are called LEAN-approved lenders.
HUD adopted the LEAN process in 2008 for all HUD 232 applications. HUD LEAN is modeled on Toyota Corporation’s efficient model of operations. HUD’s goal is to use the LEAN process to reduce application and approval times.
What is the HUD 232/223 F Program?
HUD 232/223(f) program offers long-term financing with a fixed rate for new and rehabilitated or existing health care properties. Eligible properties include:
- Nursing homes
- Skilled nursing facilities
- Assisted living facilities
- Board and care homes
- Memory care communities
- Intermediate care facilities
Properties must be regulated and licensed by the state and offer longer-term medical care. There are further HUD requirements and a list of what is considered ineligible.
Let’s Discuss Your Project!
If you’re looking to acquire a residential healthcare facility or rehabilitate an existing facility, LSG Lending Advisors can help you get the best financing and navigate the tricky HUD process. Check out current FHA and HUD interest rates and contact us today.