Looking for a nursing home business plan? You're in the right place.
A skilled nursing facility asks a lender and an investor a different set of questions from most businesses. How many beds must be full before the building pays for itself? How much of the day's revenue depends on Medicaid? How much cash does a new owner need while the first payments are still in the mail? A blank template won't show what a sensible answer looks like.
In this article we'll walk through a complete sample business plan for a 60-bed nursing facility in Charlotte, North Carolina, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The takeover structure: see how a leased, already-licensed building avoids applying for new beds, and why the $1.9 million raise is mostly reserve
- The payer mix: learn how Medicaid, Medicare and private-pay days are priced and why the mix matters as much as the census
- The staffing plan: find out how nursing hours per resident per day turn into positions, payroll and an agency budget
- The first year, month by month: spot the months that lose money before you reach them, and size your reserve against slow-paying payers
- The referral budget: see what a new owner might spend to win its first 118 admissions and where those admissions come from
- The five-year profit, cash flow and balance sheet: understand how a few points of occupancy decide whether the plan makes money
- The downside case: have an answer ready for "what if the census runs four residents short?" and the steps management would take
If you're planning a nursing facility, read this before you write your own. The facility is fictional, so take what fits and change the rest.
In this plan
To turn this example into your own nursing home business plan, use the nursing home business plan template.
The Plan in Brief
Dignity Care Nursing and Rehabilitation takes over a 60-bed skilled nursing facility in Charlotte, North Carolina, on 1 January 2027. The building is leased and already licensed, and 42 residents live in it on takeover day. Donae Louis, a licensed nursing home administrator, owns 60% of the company and three Charlotte-area investors own 40%.
The company raises $1,900,000: $1,100,000 of equity and an $800,000 SBA-guaranteed bank term loan. Of the total, $1,340,000 is a cash reserve, $400,000 buys the operating business and funds building upgrades, and $160,000 pays for legal work, licensing and the launch. The reserve is large because a nursing home pays its staff and suppliers on time and waits about 45 days for its revenue. Receivables grow by $631,606 in Year 1, and the reserve funds that build-up as well as the operating loss.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $5,123,025 | $5,977,165 | $6,339,985 |
| Net income after start-up costs | ($428,148) | $62,048 | $216,633 |
| Closing cash | $540,087 | $501,087 | $666,522 |
Year 1 loses money. A full management team and a full set of fixed costs sit on an average census of 46 residents, which is 77% of the beds. EBITDA turns positive in July 2027, and net income is positive from Year 2. Margins stay thin: net income is 3.6% of revenue in Year 5, and revenue 5% below plan in every year would turn Years 2 and 3 into losses.
A census four residents short of plan is tested in the financial plan, along with the cuts management would make in response, the effect of slow first payments and the covenant schedule the owners would ask the bank to accept.
The Building and the Operator
Legal name: Dignity Care Nursing and Rehabilitation, LLC, a North Carolina limited liability company. Operator and administrator: Donae Louis, 60%. Three investors, 40%. Building: 60 licensed beds in a single-story building from the 1990s, leased from a private owner. Takeover date: 1 January 2027. Stage: pre-opening. The lease terms and the asset purchase agreement are in negotiation, and the outgoing operator has agreed in principle to a transition period.
Why a takeover and not a new building
A new facility would need a certificate of need, a construction budget far above this raise, and months of survey and certification before a first Medicare or Medicaid payment. Taking over a licensed building avoids all three. The outgoing operator, a regional owner leaving the state, has let the census slip below its target. The price for the business is $300,000, about $5,000 a bed and 5.9% of Year 1 revenue, with $100,000 more for upgrades. It is a planning figure that reflects the slipped census and a seller leaving the state; a broker valuation and the seller's last three years of results are open items. The cost of a takeover is a building with a history: its survey record, its staff, its census and its payer mix come with it, for better or worse.
The three kinds of stay
| Kind of stay | Who pays | Typical length | Share of Year 1 resident days |
|---|---|---|---|
| Short-stay skilled care after a hospital stay | Medicare Part A or a Medicare Advantage plan | Weeks | 13% |
| Long-term care, Medicaid | North Carolina Medicaid | Months to years | 59% |
| Long-term care, private pay | The resident or family | Months to years | 28% |
Medicare Part A covers skilled nursing facility care only after an inpatient hospital stay of at least three days in a row, for up to 100 days in a benefit period. In 2026 the resident pays $0 a day for days 1 to 20 and $217 a day for days 21 to 100 (Medicare.gov, skilled nursing facility care). The model prices Medicare stays at the facility's daily rate and does not model resident coinsurance separately; unpaid coinsurance falls under the bad-debt line.
Rules the facility has to respect
North Carolina's Division of Health Service Regulation states that no one may develop new nursing home beds without a certificate of need, and that a leasing applicant applies jointly with the building's owner. This facility adds no beds. It buys the operating business and leases the building, so it does not apply for a certificate of need. The division's change-of-ownership page asks for notice to the Certificate of Need Section when a buyer acquires the real property, which a lease does not do. Whether the lease or the ownership change triggers any other step is an open item for healthcare counsel and the Certificate of Need Section before signing.
The state license changes hands on a letter with the effective date, a signed lease or bill of sale, the current licensee's written surrender of its license and an organizational chart, with an annual license fee of $420 plus $17.50 a bed, or $1,470 for 60 beds. The division issues the new license once the documents are in and the outgoing licensee has left the premises.
For Medicare, the buyer files form CMS-855A and chooses whether to take assignment of the outgoing operator's provider agreement. Refusing assignment ends the agreement, calls for written notice 60 days before the change and leads to a new certification survey. Dignity Care takes assignment, so Medicare billing continues under the existing provider number with no new survey. An assigned agreement carries its original conditions, including any existing plan of correction (42 CFR 489.18). Healthcare counsel is to confirm what else it carries, including the seller's Medicare overpayments, so $95,000 is budgeted for counsel, diligence and cost-report review, and the purchase agreement includes an indemnity and a holdback from the price.
Medicaid billing needs its own enrollment. The buyer applies through NCTracks, up to 365 days before the effective date, and the seller ends its record on or before the closing date; once it does, the seller's payment account stops working for any claim. NC Medicaid also asks for 30 days' notice of the change on its disclosure form. Dignity Care files all of these before closing. How quickly the first claims pay is not something the filings settle, and the late-payment tests after the financial plan are built around it.
The administrator must hold a North Carolina nursing home administrator license from the state's licensing board; Donae holds one. Board requirements are set out in the General Statutes and the board's own rules.
Goals for the first five years
- Grow the census from 42 residents to 50 by December 2027.
- Reach 88% occupancy, an average of 53 residents, in 2030.
- Raise skilled and private-pay days from 38% of resident days at takeover to 46% by 2031.
- Pay down the bank loan on schedule, with no owner distributions before Year 4 and then only under the bar set out in the financial plan.
Charlotte's Care Market
A supply that moves slowly
Because new beds need a certificate of need, the number of nursing home beds in Mecklenburg County changes mainly through scheduled reviews and not through ordinary construction. The facility competes for residents with a largely fixed set of buildings, plus assisted living communities, continuing-care campuses and home health agencies that keep people out of nursing homes longer. No county population count or bed-need figure is quoted here. Both are open diligence items, taken from the current State Medical Facilities Plan.
What the people who do the work are paid
The Bureau of Labor Statistics reported median pay in May 2025 of $84,300 for registered nurses in nursing and residential care facilities and $68,020 for licensed practical nurses in the same industry. Nursing assistants in nursing care facilities had a median of $43,000. Dignity Care sets pay at $85,000, $68,000 and $43,000. These are national industry medians; Charlotte pay is an open item.
Staffing rules, federal and state
In 2024 CMS finalized a federal minimum of 3.48 nursing hours per resident per day, with 0.55 of them from registered nurses. Congress barred enforcement of that standard until after 30 September 2034, and CMS repealed it in an interim final rule published on 3 December 2025 (90 FR 55687, effective 2 February 2026). The rule restored the earlier requirements: an RN on site at least eight consecutive hours a day, seven days a week, and a full-time director of nursing unless waived.
North Carolina's own rule (10A NCAC 13D .2303, readopted effective 1 August 2026) sets no numeric figure for hours per resident. It requires at least one licensed nurse on duty for direct care at all times, an RN for at least eight consecutive hours a day, seven days a week, and enough nursing staff to meet each resident's assessed needs. In a facility of 60 beds or fewer, the director of nursing can count toward both the director and patient-staffing requirements.
The Year 1 schedule delivers 3.47 scheduled nursing hours per resident per day, and the roster is paid for 3.83. The first figure is about the level of the repealed federal minimum. Dignity Care staffs at that level whatever happens to the rules, because survey results and family choice reward it. Rules can change again, and the current text is an open item for counsel.
Who the facility competes with
| Alternative | What it offers | Why a family picks it | How Dignity Care differs by design |
|---|---|---|---|
| Other skilled nursing facilities | Same services under the same state license | Nearer home, a better star rating | A 60-bed building, a set weekly schedule with discharge planners and a published staffing level |
| Assisted living communities | Housing with help for daily tasks, no skilled nursing | Private rooms, a home-like setting | Skilled nursing on site, so residents do not move again when needs rise |
| Continuing-care campuses | A ladder from independent living to nursing care | Guaranteed access for entry-fee residents | Open admission without an entry fee |
| Home health and family care | Care at home | Preference and cost | Respite and short-stay rehab for families who cannot manage at home |
CMS publishes staffing, inspection results and a star rating for every certified nursing home on its Care Compare tool, so each of these comparisons is visible to a family. The table describes positioning, not a ranking.
SWOT
| Strengths | Weaknesses |
|---|---|
| Licensed administrator with fourteen years in Charlotte long-term care | Year 1 loses money and uses part of the reserve |
| 42 residents on day one, so revenue starts immediately | Inherited survey record and a staff that did not choose the new owner |
| Nursing hours paid at 3.8 per resident day | Payroll with pay raises is 58% to 62% of revenue and Medicaid is 59% of Year 1 days, so a small census shortfall erases profit |
| Opportunities | Threats |
|---|---|
| Hospital discharges needing short-stay rehabilitation | Nurse and aide shortages and agency prices |
| Private-pay families looking for a smaller building | Medicaid or Medicare rate changes |
| A slow-growing local bed supply | A survey with serious deficiencies |
Residents, Families and Referrers
Three decision-makers
The resident rarely chooses alone. A hospital discharge planner often hands a family a short list within a couple of days, an adult child decides, and the payer decides what is covered. Each needs something different from the facility.
The discharge planner and the adult child
The discharge planner wants a bed that day, a clinical liaison who has read the chart and a facility that will not send the patient back within 30 days. Skilled admissions come from this desk first. The adult child is often in their 50s or 60s and managing a parent's decline while working. A visit the same week, a clear answer on what Medicare and Medicaid will pay and a building that does not feel like an institution are what that family asks for.
The resident and the payer
Long-stay residents arrive with several conditions, and many have dementia. Private rooms and a stable team of aides matter more to them than a program calendar. Behind them sits the payer. Medicaid pays the state's rate for the resident's care level, Medicare Advantage plans authorize a limited number of days and ask for progress notes, and private-pay families pay the daily rate on a monthly invoice.
Filling the Beds
From inquiry to admission
A call or hospital referral gets a response within two hours. In months 1 to 3 Donae takes referrals herself; from month 4 the admissions liaison reviews the chart and insurance, the director of nursing approves clinical fit, and the business office confirms the payer. A resident can be admitted the same day for a skilled stay.
Year 1 admissions
About 118 admissions: roughly 92 short-stay and 26 long-stay. The short-stay figure comes from about 2,210 Medicare and managed-care resident days at an average stay of 24 days. The long-stay figure is the 8 residents by which the census grows plus replacement of about 18 residents who leave during the year. The month-by-month census is 42, 42, 43, 44, 45, 46, 47, 47, 48, 49, 50 and 50, which is 70% occupancy in January and 83% in December.
| Source | Short-stay | Long-stay | Share |
|---|---|---|---|
| Hospital discharge planners | 70 | 4 | 63% |
| Physician practices and home health agencies | 12 | 6 | 15% |
| Managed-care plans' case managers | 10 | 0 | 8% |
| Families who find the facility directly | 0 | 10 | 8% |
| Elder-law attorneys and social workers | 0 | 6 | 5% |
Skilled resident days rise from about 2,210 in Year 1 to about 3,165 in Year 2. At the same 24-day stay, that is about 132 short-stay admissions.
Prices
The facility does not set most of its prices. Medicaid and Medicare rates are set by the programs, and managed-care plans negotiate theirs. Private-pay rates are the facility's own at $340 a day in Year 1, rising 3% a year. The daily rates in the model are $245 for Medicaid, $550 for Medicare fee-for-service, $440 for managed care and $340 for private pay. Actual rates will differ with resident acuity and the payer contract, so a lender should read all four as planning figures.
Referral and Outreach Budget
What the budget buys
Year 1 marketing is $92,000: $40,000 of launch spend paid from the raise at closing and $52,000 of running costs. Spread over about 118 admissions, that is roughly $780 per admission, or 1.8% of Year 1 revenue. The admissions liaison's salary is in payroll and not in these figures.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Rebrand, signage and website (launch) | $18,000 | A new name over the door, a site with live bed availability and a page for hospital staff |
| Open house and local press (launch) | $12,000 | Introductions to 40 discharge planners and 25 physicians' offices |
| Clinical outreach kit (launch) | $10,000 | Printed and digital admission criteria, payer list and a one-page staffing profile |
| Liaison visits to hospitals and practices | $14,000 | Weekly rounds with discharge planners; most of the 70 hospital admissions |
| Website and local search | $12,000 | Searches such as "nursing home Charlotte" and "short-term rehab near me" |
| Family information events | $8,000 | Quarterly talks on Medicare and Medicaid coverage |
| Elder-law and senior-center presence | $6,000 | Sponsorship and speaking slots |
| Tours and open days | $8,000 | Hosting discharge planners and clinic teams in the building |
| Online reviews and reputation | $4,000 | Family follow-up and monitoring of public ratings |
Marketing milestones
- January 2027: new name, signage and website live; first discharge-planner lunch.
- April 2027: 44 residents and five hospital units sending regular referrals.
- September 2027: 48 residents, Medicare and managed-care days at 14% of the total.
- December 2027: 50 residents, 56% of days on Medicaid.
Running the Floor
The building and the lease
Sixty licensed beds. Base rent is $420,000 in Year 1 ($7,000 a bed), rising 3% a year, with the landlord responsible for the roof and structure and passing property tax and building insurance through at $60,000 a year. The lease runs 15 years with options, and Donae gives a limited personal guarantee in place of a cash deposit. Rent is 8.2% of Year 1 revenue and 7.0% in Year 3. Earnings before rent divided by rent is 1.8 times in Year 3. The landlord's consent to the ownership change is a condition of closing.
Owning the building would add a real-estate purchase and a mortgage that this raise does not carry, and a single-purpose building on the balance sheet. Leasing keeps the raise at $1.9 million and leaves the structure with the landlord. The cost is rent that rises every year and a landlord whose financial position the lender will want to see.
Nursing hours and who provides them
The schedule is built from shifts. Eight-hour shifts run 365 days a year, and a full-time position works 1,850 hours after leave, holidays and sick days (2,080 paid hours less about 11%). On those conventions the Year 1 roster is short of the schedule, and agency staff and overtime close the gap.
| Nurse aides | Licensed nurses (RN and LPN) | |
|---|---|---|
| Shifts a day | 14: 6 days, 5 evenings, 3 nights | 6: 3 days, 2 evenings, 1 night |
| Hours needed in a year | 40,880 | 17,520 |
| Positions on the roster | 20 | 9 (3 RNs, 6 LPNs) |
| Hours the roster works | 37,000 | 16,650 |
| Gap met by agency and overtime | 3,880 | 870 |
| Planning rate per hour | $35 | $85 |
| Cost of the gap | $135,800 | $73,950 |
The two gaps cost $209,750, shown as $210,000 in Year 1. The aide rate is 69% above the $20.67 an hour a staff aide is paid, and the licensed-nurse rate is 2.4 times the $35.42 average hourly pay of the nine staff nurses (annual pay over 2,080 hours, before on-costs). At the Year 1 average census of 46, the aide schedule is about 1 aide to 8 residents on days, 1 to 9 in the evening and 1 to 15 at night. In paid hours, 29 nursing positions and 2 nursing leaders at 2,080 hours each come to 64,480, or 3.83 per resident per day on 16,829 resident days. The shift schedule needs 58,400 hours, or 3.47 per resident per day.
All nursing positions are filled from month 1, because they come with the building. The roster is fixed while the census climbs from 42 to 50, so paid hours per resident per day (64,480 hours over 365 days, divided by the month's census) fall from 4.2 in January to 3.5 in November and December. October to December are the thinnest months, and the agency line is sized for them. The only Year 1 hire is the admissions liaison in month 4; Donae covers admissions in months 1 to 3. The three staff RNs work 5,550 hours a year against the 2,920 needed to have an RN on site eight hours a day, seven days a week, before counting the director of nursing and the assessment coordinator.
The five nursing positions added in months 13 and 25 raise paid hours to 3.9 per resident per day in Years 2 and 3. Agency and overtime spending then steps down to $130,000 in Year 2, $90,000 in Year 3 and $80,000 in Years 4 and 5 as turnover eases and the added positions fill the schedule. Those later amounts are planning figures and not a schedule worked out year by year.
Wages and overtime
North Carolina's minimum wage is $7.25 an hour, the federal rate (U.S. Department of Labor, updated 1 July 2026). The lowest wage in the plan is $30,000 a year for housekeeping and laundry, $14.42 an hour. The lowest salaried role is the activities director at $46,000, above the federal exempt-salary level of $684 a week, or $35,568 a year (Department of Labor Fact Sheet 17A, revised September 2019; confirm the current level). Nurses and aides are paid hourly, and overtime beyond 40 hours is paid at time and a half; it is part of the agency and overtime line.
A typical day
Morning meetings review admissions, falls and skin issues. The assessment coordinator schedules each resident's required assessments, which set the Medicare rate. Therapy is provided by a contract therapy company paid per visit, and its cost is inside the direct costs of the skilled-stay lines.
Getting paid
The seller keeps the receivables it earned before takeover, so Dignity Care starts with none. At a 45-day collection period the facility carries $631,606 of receivables at the end of Year 1 and $837,786 at the end of Year 5. Private-pay families are invoiced monthly and Medicare pays in about 30 days. Medicaid and managed-care claims take about 55 days. The first Medicaid payments depend on the NCTracks enrollment, and the first Medicare payments on the CMS-855A and the payment account on file. Both filings go in before closing. The stress tests after the financial plan run delays of 30 and 60 days.
North Carolina also charges nursing facilities a provider assessment on non-Medicare days, and it is due within 15 days of the end of the month, before the Medicaid claims for that month have paid. NC Medicaid's January 2026 notice sets $35.48 a day for January to March 2026 for facilities with up to 42,000 patient days a year, and the revenue funds higher Medicaid per diem rates. The model has no assessment line; its daily rates are net planning figures that treat the assessment and the add-on it funds as offsetting. How closely they offset depends on the facility's rate sheet and payer mix, and the stress tests price a shortfall.
Systems
An electronic health record with billing, a pharmacy provider with automated dispensing, and a payroll and scheduling platform. Software is $75,000 in Year 1.
Licenses, insurance and quality
- State nursing home license, and Medicare and Medicaid certification carried across on the ownership change.
- A nursing home administrator license for Donae, and current licenses for every nurse.
- Professional and general liability, property contents, cyber and employment practices cover, budgeted at $195,000 in Year 1, or $3,250 a bed. Premiums depend on claims history, and a broker quote is an open item.
- Workers' compensation, included in the 27% payroll on-costs.
- A medical director under contract, a consultant pharmacist and a registered dietitian, with a quarterly quality-assurance meeting.
Vendors
Food service is done in-house. Pharmacy, therapy, laundry linen and medical supplies each have two quotes, and none is hard to replace.
The Leadership Team
Donae Louis, administrator and managing owner
Donae has fourteen years in long-term care in Charlotte. She started as a nurse aide, trained as an LPN, then spent six years as assistant administrator at a 120-bed facility before qualifying as an administrator. She holds a North Carolina nursing home administrator license. Her $350,000 is her savings plus the sale of a rental property.
Director of nursing
A registered nurse with at least five years in long-term care, hired before closing. The director of nursing owns staffing schedules, infection control and the clinical response to survey findings.
Where the team is thin
Donae has not owned a facility before, has not prepared a Medicaid cost report and has not run a business under a bank's loan covenants. A healthcare accountant on retainer covers the cost report, and a quarterly reporting calendar agreed in the loan terms covers the covenants. For ownership experience, the three investors form an advisory board with Donae that meets quarterly.
Succession and absence
The director of nursing is the licensed alternate for clinical decisions. If Donae is out for more than a few weeks, an interim administrator on contract can be placed; no cost for one is budgeted.
Investors and the bank
Three investors hold 40% between them, 13.3% each: a retired owner of two nursing homes in the Carolinas, a commercial real estate investor with no tie to the landlord, and a retired hospital finance executive. None supplies pharmacy, therapy or other services to the facility, none refers residents to it, and none has a day-to-day role. The bank takes a personal guarantee from Donae, who holds 60%, and a lien on the equipment and receivables, and expects annual reviewed accounts. SBA rules generally call for a guarantee from every holder of 20% or more (13 CFR 120.160); each investor holds less than that, and the lender may still ask for one. The three investors are also asked to stand behind a $250,000 standby commitment, described under the bank's terms.
Financial Plan
One five-year model produces every table below: monthly for Year 1, annual after that. Funding comes first, then the census, rate and staffing figures that drive each line. Stress tests, covenant terms and the questions a lender would still ask follow the model.
Taking over the building: funding
| Use of funds | Amount |
|---|---|
| Purchase price of the operating business: equipment, furnishings, resident records, license rights and going-concern value | $300,000 |
| Life-safety upgrades, flooring, paint and nurse-call repairs | $100,000 |
| State license transfer, Medicare and Medicaid enrollment, administrator license | $25,000 |
| Healthcare counsel, ownership-change diligence, lender fees, cost-report review | $95,000 |
| Launch: rebrand, signage, hospital and physician outreach | $40,000 |
| Cash reserve for slow first payments, payroll and agency cover | $1,340,000 |
| Total uses | $1,900,000 |
| Source of funds | Amount |
|---|---|
| Donae Louis's savings and the sale of a rental property | $350,000 |
| Three Charlotte-area investors (40% of the company) | $750,000 |
| SBA-guaranteed bank term loan | $800,000 |
| Total sources | $1,900,000 |
Donae Louis invests $350,000 and three Charlotte-area investors put in $750,000 between them, $250,000 each, for 40% of the company, which leaves Donae with 60%. Her stake is larger than her 32% share of the cash because she holds the administrator license, sourced the transaction and runs the building, on top of the $125,000 salary in payroll. Equity is $1,100,000 of the $1,900,000 raised. An SBA-guaranteed bank term loan supplies the other $800,000 at 10.5% over ten years, interest-only for the first twelve months; the rate and the interest-only period are planning figures for the lender to set. The raise is $1.9 million because a nursing home pays its staff and suppliers weeks before its payers pay it. The seller keeps its own receivables, so the facility starts with none, and at a 45-day collection period it builds $631,606 of receivables in Year 1. The $1,340,000 reserve, 71% of the raise, funds that build-up and the Year 1 operating loss, about $800,000 of cash use in all, and leaves $540,087 at the end of Year 1. Dignity Care takes assignment of the outgoing operator's Medicare provider agreement, so payments continue under the existing numbers. Month-end cash on the basis described under the monthly table bottoms at about $373,000 in October 2027. The stress tests after the financial plan show what a 30- or 60-day delay in first payments does to that low; the answer is a receivables line of about $400,000, which the owners would ask the bank to provide and which is not counted as a source. It covers every case in that table except a 60-day slowdown across all payers. A closing two months later than 1 January 2027 moves every date in the model by two months and changes no figure, because the equity and the loan fund at closing. The cost of a late closing sits outside the model, in diligence, counsel time and staff attrition before takeover.
Operating figures behind the model
- The building has 60 licensed beds and is leased, not bought. Base rent is $420,000 in Year 1 ($7,000 a bed, 8.2% of revenue) and rises 3% a year. The landlord keeps the structure and roof and passes property tax and building insurance through at $60,000 a year, shown as its own line. The tenant pays utilities and insures its contents. Rent per bed is a planning figure; the signed lease is an open item.
- The census is 42 residents (70% occupancy) on takeover day and 50 by December 2027. Average census is 46.1 in Year 1 (16,829 resident days), then 51, 52.5, 53 and 53 in Years 2 to 5, which is 88% occupancy at the top.
- Resident days are priced by payer. Year 1 daily rates are $245 for Medicaid, $550 for Medicare fee-for-service skilled stays, $440 for Medicare Advantage and other managed care, and $340 for private pay. All four are planning figures. The state sets Medicaid rates, Medicare sets its rate from each resident's case mix and the local wage index, managed-care plans negotiate, and the managed-care figure is set at 80% of the Medicare one.
- North Carolina charges nursing facilities a provider assessment on non-Medicare days: NC Medicaid's January 2026 notice sets $35.48 a day for facilities with up to 42,000 patient days a year for January to March 2026, and the money funds higher Medicaid per diem rates. The model has no assessment line. Its daily rates are net planning figures that treat the assessment and the rate add-on it funds as offsetting. At the Year 1 day count, each $1 a day that rates do not recover costs about $15,700 a year.
- Medicaid is 62% of resident days at takeover and 56% by December 2027, easing to 54% by Year 5 as skilled stays and private-pay days grow. Private pay holds at about 28% of days.
- Rates rise 2.5% a year for Medicaid and managed care and 3% for Medicare and private pay. Wage raises are 3% a year, so rate growth alone does not widen margins.
- Year 1 staffing is 29 RN, LPN and aide positions plus a director of nursing and an assessment coordinator: 64,480 paid nursing hours, or 3.83 per resident per day on 16,829 resident days. The scheduled floor (14 aide shifts and 6 licensed-nurse shifts a day, 8 hours each) needs 58,400 hours, 3.47 per resident per day, against 53,650 hours the roster works at 1,850 worked hours per position. Agency and overtime fill the 4,750-hour gap at $35 an hour for aides and $85 for licensed nurses, $210,000 in Year 1. The line falls to $130,000 in Year 2, $90,000 in Year 3 and $80,000 in Years 4 and 5 as the added positions fill the schedule; those later amounts are planning figures and not a schedule worked out year by year. The Running the Floor section sets out the Year 1 arithmetic.
- Pay rates sit at or near the May 2025 national medians published by the Bureau of Labor Statistics for staff in nursing and residential care facilities: $85,000 for an RN, $68,000 for an LPN and $43,000 for a nurse aide. Charlotte pay is an open item. The lowest wage in the model is $30,000 a year for housekeeping and laundry ($14.42 an hour), against a North Carolina minimum of $7.25. The lowest salaried role, the activities director at $46,000, sits above the federal exempt-salary floor of $684 a week ($35,568 a year). Nurses and aides are paid hourly, and overtime is part of the agency and overtime line. Payroll on-costs are 27% of wages: payroll taxes, health benefits and workers' compensation, which is expensive in nursing homes.
- Receivables average 45 days of revenue: private pay and Medicare about 30 days, Medicaid and managed-care claims about 55. Suppliers and contract therapists are paid in 30 days. The monthly view has no receivables timing, so each cash low in this plan subtracts 45/30 of that month's revenue from the monthly cash balance. The figure is approximate: it overstates receivables in the first two months, when they cannot exceed the revenue earned so far, and it ignores payables.
- Direct costs are 9% of Medicaid and private-pay revenue, 20% of Medicare fee-for-service revenue and 18% of managed-care revenue, because skilled stays carry therapy, drugs and supplies that long-stay residents use less of. The engine applies the Year 1 blend of 11.16% to the direct-costs line in every year. At each later year's own payer mix the blend is 11.7% to 11.8%, so a separate operating line adds the difference: $31,804 in Year 2, $33,319 in Year 3, $34,666 in Year 4 and $43,284 in Year 5.
- Insurance is $195,000 in Year 1 ($3,250 a bed) for professional and general liability, contents, cyber and employment practices cover, rising about 5% a year. It is a planning figure; premiums depend on the facility's claims history, and a broker quote is an open item.
- Tax uses the federal corporate rate of 21% (26 U.S.C. 11(b)) and a 2% North Carolina rate. Under Session Law 2021-180 the state rate is 2% for 2026, 1% from 2028 and 0% from 2030 (NC Department of Revenue), so 2% is conservative after 2027, and an LLC taxed through its owners would pay no corporate tax. The model's tax base ignores start-up costs and the federal 80% limit on using carried-forward losses; a hand calculation that includes both (the combined rate of 22.58%, the $160,000 of start-up costs added to the Year 1 loss, and 80% of each year's taxable income open to the carried-forward loss) lowers tax by $45,780 in Year 4, raises it by $2,802 in Year 2 and $6,850 in Year 3, and leaves Year 5 unchanged; the five-year total is $36,128 lower.
- Distributions are $50,000 in Year 4 and $100,000 in Year 5, shared 60/40 between Donae and the investors. They are paid only if debt service cover is at least 1.25x, year-end cash after the payment is at least one and a half months of cash operating costs, and the lender agrees.
Revenue by payer
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Medicaid residents | $2,427,416 | $2,617,827 | $2,712,868 | $2,807,173 | $2,825,036 |
| Medicare Part A (fee-for-service) short stays | $607,495 | $843,632 | $894,498 | $930,107 | $958,011 |
| Medicare Advantage and other managed-care stays | $485,994 | $755,583 | $797,251 | $824,965 | $939,543 |
| Private-pay residents | $1,602,120 | $1,760,123 | $1,935,368 | $2,012,414 | $2,072,787 |
| Total revenue | $5,123,025 | $5,977,165 | $6,339,985 | $6,574,659 | $6,795,377 |
| Growth on prior year | – | 17% | 6% | 4% | 3% |
Medicaid residents are the largest line, 47% of Year 1 revenue and 42% in Year 5. A Medicare Part A day is priced at about 2.2 times a Medicaid day and a private-pay day about 39% above it. Mix does as much of the work as the census does: revenue per resident day is $304 in Year 1 and $351 in Year 5, because the model adds skilled and private-pay days faster than Medicaid days.
The first twelve months
| Month | Medicaid residents | Medicare Part A (fee-for-service) short stays | Medicare Advantage and other managed-care stays | Private-pay residents | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $197,774 | $35,805 | $28,644 | $123,950 | $386,173 | ($47,140) |
| Feb 2027 | $177,063 | $34,104 | $27,283 | $111,955 | $350,405 | ($78,917) |
| Mar 2027 | $198,920 | $40,657 | $32,525 | $126,902 | $399,004 | ($35,741) |
| Apr 2027 | $195,216 | $42,240 | $33,792 | $125,664 | $396,912 | ($37,599) |
| May 2027 | $204,444 | $46,733 | $37,386 | $132,804 | $421,367 | ($15,873) |
| Jun 2027 | $200,401 | $48,300 | $38,640 | $131,376 | $418,717 | ($18,228) |
| Jul 2027 | $209,636 | $53,181 | $42,544 | $138,706 | $444,067 | $4,294 |
| Aug 2027 | $207,689 | $55,366 | $44,293 | $138,706 | $446,054 | $6,059 |
| Sep 2027 | $203,341 | $56,880 | $45,504 | $137,088 | $442,813 | $3,180 |
| Oct 2027 | $212,467 | $62,279 | $49,823 | $144,609 | $469,178 | $26,603 |
| Nov 2027 | $207,805 | $63,750 | $51,000 | $142,800 | $465,355 | $23,207 |
| Dec 2027 | $212,660 | $68,200 | $54,560 | $147,560 | $482,980 | $38,865 |
Census climbs from 42 to 50 residents, so revenue rises through the year; it dips against the prior month in February, April, June, September and November only because those months have fewer days. EBITDA is negative from January to June and positive from July to December. The lowest month-end cash balance, taken as the monthly view's cash less that month's revenue times 45/30 for receivables, is October 2027, at about $373,000. That is approximate, and it is a month-end balance on a different basis from the Year 1 closing cash of $540,087 in the cash table, which comes from the annual statements.
Staffing plan
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Administrator (founder, licensed nursing home administrator) | $125,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Director of nursing (RN) | $112,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Assessment coordinator and assistant director of nursing (RN) | $88,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Staff RNs, 3 positions | $85,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Staff RNs, 1 added position | $85,000 | Month 13 | – | 1 | 1 | 1 | 1 |
| LPNs, 6 positions | $68,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| LPNs, 1 added position | $68,000 | Month 13 | – | 1 | 1 | 1 | 1 |
| Nurse aides, 20 positions | $43,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Nurse aides, 2 added positions | $43,000 | Month 13 | – | 1 | 1 | 1 | 1 |
| Nurse aides, 1 further position | $43,000 | Month 25 | – | – | 1 | 1 | 1 |
| Social services director | $56,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Activities director | $46,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Business office manager | $58,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Billing and patient-accounts clerk | $46,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Admissions and hospital liaison | $60,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Dietary manager | $60,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Cooks and dietary aides, 5 positions | $31,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Housekeeping and laundry, 4 positions | $30,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Maintenance supervisor | $50,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Total payroll incl. on-costs | $3,154,680 | $3,477,260 | $3,531,870 | $3,531,870 | $3,531,870 |
The wage column is per position. A line that holds several positions shows 1 in the year-end columns, and its position count is in the role name. Year 1 ends with 48 people: 29 RN, LPN and aide positions, the director of nursing, the assessment coordinator, the administrator, and 16 others in the office, social services, activities, dietary, housekeeping and maintenance. The administrator covers admissions until the liaison starts in month 4. Four nursing positions are added in month 13 (one RN, one LPN, two aides) and a further aide in month 25 as the census passes 52, taking headcount to 52 at the end of Year 2 and 53 from Year 3. Revenue per employee at year-end headcount is $106,730 in Year 1 and $128,215 in Year 5. Pay raises of 3% are charged as a separate line from Year 2.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $5,123,025 | $5,977,165 | $6,339,985 | $6,574,659 | $6,795,377 |
| Direct costs (food, medical and incontinence supplies, pharmacy and contract therapy) | ($571,636) | ($666,943) | ($707,427) | ($733,612) | ($758,240) |
| Gross profit | $4,551,389 | $5,310,222 | $5,632,558 | $5,841,047 | $6,037,137 |
| Payroll incl. on-costs | ($3,154,680) | ($3,477,260) | ($3,531,870) | ($3,531,870) | ($3,531,870) |
| Rent | ($420,000) | ($432,600) | ($445,600) | ($459,000) | ($472,700) |
| Utilities | ($150,000) | ($154,000) | ($158,000) | ($162,000) | ($166,000) |
| Marketing | ($52,000) | ($50,000) | ($50,000) | ($52,000) | ($54,000) |
| Insurance | ($195,000) | ($205,000) | ($215,000) | ($226,000) | ($237,000) |
| Professional fees | ($85,000) | ($85,000) | ($88,000) | ($90,000) | ($92,000) |
| Software subscriptions | ($75,000) | ($78,000) | ($80,000) | ($82,000) | ($84,000) |
| Medical director and pharmacy, dietitian and infection-control consultants | ($80,000) | ($82,000) | ($84,000) | ($86,000) | ($88,000) |
| Agency and overtime cover for open shifts | ($210,000) | ($130,000) | ($90,000) | ($80,000) | ($80,000) |
| Licensure fees, survey costs, CNA training and recruiting | ($45,000) | ($40,000) | ($38,000) | ($38,000) | ($40,000) |
| Office, resident supplies not billed, small repairs | ($60,000) | ($62,000) | ($64,000) | ($66,000) | ($68,000) |
| Equipment replacement | ($45,000) | ($60,000) | ($65,000) | ($70,000) | ($75,000) |
| Bad debt allowance | ($51,000) | ($60,000) | ($63,000) | ($66,000) | ($68,000) |
| Property tax and building insurance passed through by the landlord | ($60,000) | ($62,000) | ($64,000) | ($66,000) | ($68,000) |
| Direct costs: extra cost of the later-year payer mix | $0 | ($31,804) | ($33,319) | ($34,666) | ($43,284) |
| Annual pay raises (3% a year) | $0 | ($104,318) | ($215,091) | ($327,500) | ($443,281) |
| EBITDA | ($131,291) | $196,240 | $347,678 | $404,011 | $426,002 |
| Depreciation | ($52,857) | ($52,857) | ($52,857) | ($52,857) | ($52,857) |
| Interest | ($84,000) | ($81,335) | ($75,116) | ($68,212) | ($60,547) |
| Income tax | $0 | $0 | ($3,072) | ($63,888) | ($70,585) |
| Net income before start-up costs | ($268,148) | $62,048 | $216,633 | $219,054 | $242,014 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($160,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($428,148) | $62,048 | $216,633 | $219,054 | $242,014 |
Year 1 loses $268,148 before start-up costs and $428,148 after them, because a full management team and fixed costs sit on a census that averages 77% of the beds. EBITDA turns positive in July 2027. Net income is positive from Year 2 and reaches 3.6% of revenue by Year 5, so the cushion is thin: the stress tests after the financial plan show revenue 5% below plan in every year turning Year 3 into a loss of $57,107. EBITDAR (EBITDA before rent) is 12.5% of revenue in Year 3, which covers rent 1.8 times. Income tax is zero in Years 1 and 2 and $3,072 in Year 3, because the Year 1 loss carries forward against later profit. The direct-costs line carries the Year 1 blend of 11.16% in every year, and the line headed extra cost of the later-year payer mix adds what each later year's own mix would cost on top of that.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($959,913) | $17,433 | $228,086 | $245,131 | $269,683 |
| Equipment and building upgrades | ($400,000) | $0 | $0 | $0 | $0 |
| Funding received | $1,900,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($56,433) | ($62,652) | ($69,556) | ($77,222) |
| Owner distributions | $0 | $0 | $0 | ($50,000) | ($100,000) |
| Net change in cash | $540,087 | ($38,999) | $165,434 | $125,574 | $92,461 |
| Closing cash | $540,087 | $501,087 | $666,522 | $792,096 | $884,557 |
Closing cash is positive at every year end. Year 1 operations use $959,913: the $428,148 loss after start-up costs, less $52,857 of depreciation, plus $631,606 of new receivables, less $46,984 of new payables. The $400,000 for the purchase and upgrades goes out at closing. Cash dips in Year 2 as loan principal starts, then builds. Distributions of $50,000 in Year 4 and $100,000 in Year 5 are below each year's net income ($219,054 and $242,014) and below cash from operations after principal ($175,575 and $192,461), and cumulative distributions ($50,000 and $150,000) stay below cumulative net income after start-up costs ($69,586 and $311,600). Year-end cash after each payment is $792,096 and $884,557, against a bar of about $771,000 and $796,000 (one and a half months of cash operating costs, revenue less EBITDA).
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $540,087 | $501,087 | $666,522 | $792,096 | $884,557 |
| Accounts receivable | $631,606 | $736,911 | $781,642 | $810,574 | $837,786 |
| Equipment and building upgrades (net) | $347,143 | $294,286 | $241,429 | $188,571 | $135,714 |
| Total assets | $1,518,835 | $1,532,284 | $1,689,592 | $1,791,242 | $1,858,058 |
| Accounts payable (suppliers and contract therapy) | $46,984 | $54,817 | $58,145 | $60,297 | $62,321 |
| Bank loan | $800,000 | $743,567 | $680,915 | $611,359 | $534,137 |
| Paid-in capital | $1,100,000 | $1,100,000 | $1,100,000 | $1,100,000 | $1,100,000 |
| Retained earnings | ($428,148) | ($366,100) | ($149,468) | $19,586 | $161,600 |
| Total liabilities and equity | $1,518,835 | $1,532,284 | $1,689,592 | $1,791,242 | $1,858,058 |
Margins and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -2.6% | 3.3% | 5.5% | 6.1% | 6.3% |
| Net margin (before start-up costs) | -5.2% | 1.0% | 3.4% | 3.3% | 3.6% |
| Payroll incl. pay raises as share of revenue | 62% | 60% | 59% | 59% | 58% |
| Revenue per full-time equivalent at year end | $106,730 | $114,945 | $119,622 | $124,050 | $128,215 |
| Average monthly revenue | $426,919 | $498,097 | $528,332 | $547,888 | $566,281 |
| Monthly revenue needed to cover operating costs | $439,234 | $479,690 | $495,720 | $509,992 | $526,323 |
| Debt service cover (EBITDA / interest + principal) | -1.6x | 1.4x | 2.5x | 2.9x | 3.1x |
The last two rows before the debt cover row compare average monthly revenue with the monthly revenue needed to cover operating costs. Year 1 averages $426,919 a month against $439,234 needed. From Year 2 revenue clears the requirement, by 4% that year and 7% in Year 3, so a census shortfall of a few residents erases the margin. Debt service cover is negative in Year 1 because EBITDA is a loss, then 1.4x in Year 2, 2.5x in Year 3, 2.9x in Year 4 and 3.1x in Year 5. A lender that tests lease-adjusted fixed-charge cover (EBITDAR over rent plus interest plus principal) would see 0.57x in Year 1, 1.10x in Year 2, 1.36x in Year 3, 1.45x in Year 4 and 1.47x in Year 5.
A census four residents short of plan
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $4,892,708 | $5,508,368 | $5,856,938 | $6,078,458 | $6,282,519 |
| Net income before start-up costs | ($415,479) | $15,893 | ($42,298) | ($12,946) | $18,293 |
| Net income after start-up costs | ($575,479) | $15,893 | ($42,298) | ($12,946) | $18,293 |
| Closing cash | $419,008 | $361,064 | $269,192 | $214,266 | $184,905 |
This case has four fewer residents than the base case. Year 1 adds 4 residents instead of 8 (42 in January 2027, 46 in December), and Years 2 to 5 average 47, 48.5, 49 and 49 against 51, 52.5, 53 and 53, with the payer mix on plan. Revenue is 4.5% lower in Year 1 and between 7% and 8% lower in Years 2 to 5. The blended direct-cost rate is 11.15% against 11.16%, and the extra direct-cost line is recomputed at the downside revenue ($29,743, $31,241, $32,527 and $40,511 in Years 2 to 5). Management reacts from month 7, after six months of trading. The administrator takes a 20% pay cut, one dietary and one housekeeping position stay unfilled, and the five nursing positions the base case adds in months 13 and 25 are added 12 months later. Agency and overtime follow that hiring path a year behind the base case ($210,000, $216,000, $130,000, $90,000 and $80,000), equipment replacement is cut 40% from Year 2, and bad debt moves with revenue in every year. Marketing, rent, insurance, professional fees and every other cost line are not cut, and distributions are zero. The Year 1 agency and equipment lines are left untrimmed because the model spreads each year's cost evenly across the months, so Year 1 is a little worse than a mid-year response would produce. Year 1 loses $575,479 after start-up costs and equity ends the year at $524,521. Net income is $15,893 in Year 2, a loss of $42,298 in Year 3, a loss of $12,946 in Year 4 and a profit of $18,293 in Year 5. Year-end cash falls every year, from $419,008 in Year 1 to $184,905 in Year 5, and stays below the base case in every year; the lowest Year 1 month-end balance, on the same basis as the base case, is about $311,000 in December 2027. Debt service cover is negative in Year 1, then 1.09x, 0.62x, 0.78x and 0.96x in Years 2 to 5, so a 1.25x test fails in every year from Year 2 and a 1.0x test in Years 3 to 5. This case does not recover on its own. It needs a further lever by Year 4, such as a rent concession, a push on admissions or the standby investor capital that the owners would ask the bank to accept, set out after the financial plan.
Stress Tests and the Lender's Questions
How the tests are run
Each row of the first table changes one input in the base case, except the last, which changes the census path and the payer mix together. Nothing else moves and management does not respond. Costs that move with sales follow revenue in every row that changes revenue: direct costs at the model's blended rate, the extra direct-cost line for each later year's payer mix (recomputed from each row's own revenue and mix), and the bad-debt allowance at its share of revenue. The payer mix and the 11.16% direct-cost rate stay as in the base case in every row except three. The direct-cost row adds two points to every payer line, so the blended rate is 13.16%. The Medicaid row cuts the price and keeps the cost in dollars, which lifts the blended rate to 11.32%. The last row holds the takeover mix in every year, which gives a blended rate of 10.69%. The assessment row adds $5 a day on every resident day not paid by Medicare fee-for-service (15,724 days in Year 1). The slower-payers row changes only the collection period. The last column is the monthly view's cash less that month's revenue times the collection period over 30, at the lowest month, and is approximate.
| Case | Year 2 net income | Year 3 net income | Year 3 debt cover | Year 3 closing cash | Lowest Year 1 month-end cash |
|---|---|---|---|---|---|
| Base case | $62,048 | $216,633 | 2.5x | $666,522 | $372,870 (Oct) |
| Revenue 5% lower in every year | ($198,873) | ($57,107) | 0.5x | ($56,984) | $211,443 (Dec) |
| Revenue 10% lower in every year | ($459,794) | ($333,919) | -1.5x | ($783,562) | $22,647 (Dec) |
| Direct costs 2 points of revenue higher on every payer line | ($57,495) | $92,905 | 1.6x | $331,212 | $289,377 (Oct) |
| Wages 10% higher for every role | ($296,110) | ($154,991) | -0.2x | ($378,728) | $84,771 (Dec) |
| Rent 10% higher in every year | $18,788 | $175,145 | 2.2x | $539,774 | $337,870 (Oct) |
| Insurance 50% higher in every year | ($40,452) | $112,205 | 1.7x | $362,094 | $291,620 (Oct) |
| Agency and overtime 50% higher in every year | ($2,952) | $174,705 | 2.2x | $454,594 | $285,370 (Oct) |
| Medicaid rate 3% lower, days and costs unchanged | ($15,700) | $139,127 | 1.9x | $449,286 | $322,925 (Oct) |
| Assessment not recovered through rates, $5 a day | ($23,581) | $131,558 | 1.9x | $417,196 | $307,352 (Oct) |
| Payers pay 15 days slower (60-day collection period) | $62,048 | $216,633 | 2.5x | $405,974 | $138,281 (Oct) |
| Census stays at 42 and the payer mix at the takeover mix, every year | ($1,032,467) | ($1,080,567) | -6.9x | ($2,035,621) | $60,727 (Dec) |
Reading the table: the base case is fragile. A facility with payroll near 60% of revenue (with pay raises) and a fixed lease has little room, and about 87 cents of every revenue dollar lost reaches EBITDA. A census 2.5 residents short of plan every year (revenue 5% lower) turns Years 2 and 3 into losses, and a 10% rise in wages turns every year into one. Direct costs 2 points higher, insurance 50% higher, agency and overtime 50% higher, a 3% cut in the Medicaid rate and an unrecovered assessment of $5 a day each turn Year 2 into a loss and leave Year 3 profitable. Only rent 10% higher leaves Years 2 and 3 profitable, and the slower-payers row, which changes cash and not profit, leaves them at the base figures of $62,048 and $216,633. A census that never rises above the takeover level does not recover. The bank would see the same pattern and ask for the reserve, the covenant terms and the receivables line described below.
If the payers run late
The cash test uses the same monthly basis as the base case: monthly cash less that month's revenue times 45/30. All figures in this table are approximate; the basis also ignores payables, which is conservative. A delay is added on top. "All payers slower" adds the extra days of revenue to every month. "Medicaid and managed-care claims late" adds the stated days of Medicaid and managed-care revenue (56.9% of Year 1 revenue) to the receivable at each month-end from January to June and then returns to the base pattern, or keeps it through December in the all-year rows. The method overstates receivables in the first two months, when they cannot exceed the revenue earned so far, which is conservative. It ends the January to June delay abruptly, which flatters the second half of the year; the all-year rows give the adverse figure.
| Case | Lowest month-end cash, Year 1 |
|---|---|
| Base case, 45-day collection period | $372,870 (Oct) |
| All payers 15 days slower | $138,281 (Oct) |
| All payers 30 days slower | ($96,308) (Oct) |
| All payers 60 days slower | ($565,721) (Dec) |
| Medicaid and managed-care claims 30 days late, January to June services | $197,385 (Jun) |
| Medicaid and managed-care claims 60 days late, January to June services | ($41,656) (Jun) |
| Medicaid and managed-care claims 30 days late all year | $110,580 (Oct) |
| Medicaid and managed-care claims 60 days late all year | ($151,710) (Oct) |
The reserve alone covers a 15-day slowdown across all payers and a 30-day delay in Medicaid and managed-care payments, whether it lasts to June or all year. It does not cover a 60-day delay in those payments or a 30-day slowdown across all payers. The owners would ask the bank for a receivables line of about $400,000, undrawn in the base case and not counted as a source of funds. It would cover each of those cases but not a 60-day slowdown across all payers.
The bank's terms
A lender reads this as the acquisition of a facility that loses money in its first year, with the owners' equity (58% of the raise) and the reserve standing between the loan and that loss. Debt service cover is EBITDA divided by interest plus principal. The first twelve months are interest-only and Year 1 EBITDA is a loss, so a cover test cannot start in Year 1.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Base case | -1.56x | 1.42x | 2.52x | 2.93x | 3.09x |
| Census four residents short | -3.32x | 1.09x | 0.62x | 0.78x | 0.96x |
| Test the owners would ask for | None | 1.25x | 1.25x | 1.25x | 1.25x |
The base case passes the 1.25x test in every year from Year 2. The census-short case misses it in every year from Year 2 and misses a 1.0x test in Years 3 to 5. Closing the gap to 1.25x in that case takes about $22,000 of extra EBITDA in Year 2, $87,000 in Year 3, $64,000 in Year 4 and $41,000 in Year 5, or about $213,000 in all, and the case does not recover on its own. The owners would therefore ask for five terms. First, no cover test in Year 1 and a 1.25x test from Year 2, with a right to cure a miss by investor capital counted as EBITDA. Second, a standby equity commitment of $250,000 from the three investors, drawn only to cure a missed test or to hold the cash floor. Third, a minimum year-end cash balance of $150,000, against a census-short low of $184,905 in Year 5 before any cure. Fourth, no distributions while cover is below 1.25x, cash is below the bar set out under the operating figures, or a cure has been used. Fifth, a receivables line of about $400,000. If the lender tests lease-adjusted fixed-charge cover instead, the base case is 1.10x in Year 2 and 1.36x in Year 3, so a 1.25x test would start in Year 3.
What a lender would still ask
- The signed lease: term, rent steps, renewal options, the landlord's consent to the ownership change, the limited guarantee and the landlord's own lender.
- The seller's survey history, star rating, open deficiencies and any plan of correction, all of which come with an assigned Medicare agreement, plus three years of cost reports and census.
- Support for the $300,000 price: a broker valuation, the seller's results and the reason the census slipped.
- The facility's current NC Medicaid rate sheet and its assessment statements, to see how closely the rate add-on offsets the assessment.
- Filing dates and confirmation for the NCTracks enrollment and the Medicare payment account, before closing and not after it.
- Charlotte wage data for nurses and aides, the agency contracts the facility inherits, and the accrued leave of inherited staff, which the purchase agreement should leave with the seller.
- A broker quote for liability cover against the $195,000 planning figure, and the inherited claims history.
- The investors' identities, their willingness to stand behind the $250,000 commitment, and the reason for a 60/40 split. By the end of Year 5 the investors' 40% of book equity is $504,640 and they have received $60,000 of distributions, against $750,000 paid in. Their return depends on what a stabilized 53-resident facility is worth, which this plan does not estimate.
- Scope of the personal guarantee, and whether the SBA loan terms used here (interest-only for twelve months, ten years) fit the program and the lender.
- Building condition: a life-safety survey and a bid for the $100,000 of upgrades, because the landlord holds only the structure and roof.
- A closing two months late. It changes no figure in the model; the questions are the cost of extra counsel time and whether the inherited staff stay.
Sources
- North Carolina DHHS, Division of Health Service Regulation, Establish a Nursing Home: no new nursing home beds without a certificate of need; a leasing applicant applies jointly with the owner.
- North Carolina DHHS, Division of Health Service Regulation, Change of Ownership of a Nursing Home, page last modified 5 May 2023: notice, license fee of $420 plus $17.50 a bed, Medicare enrollment, the assignment decision and the notice to the Certificate of Need Section when real property is acquired.
- North Carolina Office of Administrative Hearings, 10A NCAC 13D .2303, Nurse Staffing Requirements, readopted effective 1 August 2026.
- CMS, Repeal of Minimum Staffing Standards for Long-Term Care Facilities, interim final rule, 90 FR 55687, 3 December 2025, effective 2 February 2026.
- 42 CFR 489.18, Change of ownership or leasing: effect on provider agreement (Legal Information Institute).
- NC Medicaid, Skilled Nursing Facility Provider Assessment Updates, 26 January 2026, and Nursing Facility Cost Assessment: the assessment on non-Medicare days and how it funds higher per diem rates.
- NC Medicaid, Notification Required for Change of Ownership, 5 November 2024, and NCTracks, Change of Ownership (CHOW) FAQs, updated 7 May 2025.
- Medicare.gov, Skilled nursing facility (SNF) care: three-day hospital stay, up to 100 days, 2026 coinsurance.
- Bureau of Labor Statistics, Occupational Outlook Handbook, May 2025 pay: Registered nurses, Licensed practical and licensed vocational nurses, Nursing assistants and orderlies.
- North Carolina Department of Revenue, 2021 corporate taxes law changes: the corporate rate schedule under Session Law 2021-180 (2.25% for 2025, 2% for 2026, 1% for 2028, 0% after 2029). 26 U.S.C. 11(b): the 21% federal corporate rate.
- U.S. Department of Labor, State minimum wage laws, updated 1 July 2026, and Fact Sheet 17A, revised September 2019: the North Carolina minimum wage and the exempt-salary level of $684 a week; the current level should be confirmed.
- 13 CFR 120.160: SBA personal guarantees from holders of 20% or more.
- Planning figures with no published source: the four daily rates, the purchase price, rent per bed, the liability premium, the agency and overtime rates, the collection periods and the SBA loan terms.
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