How do you finance buying a home health care agency?

First, which kind of agency is it?

Buyers and brokers use "home health" for two different businesses, and lenders underwrite them differently. A Medicare-certified home health agency provides skilled nursing and therapy under a physician's or allowed practitioner's orders and is paid mostly by Medicare, Medicare Advantage plans and Medicaid. A private-duty or non-medical home care agency provides personal care and companionship, paid privately, through long-term care insurance, or through state Medicaid programs. Some companies do both. The SBA lending data for home health care services shows how SBA lenders have financed the industry and how acquisition loans there compare with the program as a whole.

Keeping the Medicare enrollment: stock, assets and the 36-month rule

A certified agency that loses its ability to bill Medicare is not the business the buyer paid for. How the purchase is structured decides how that ability carries over. In a purchase of the agency's shares or membership interests, the same legal entity keeps its enrollment, and the change in ownership is reported to Medicare and the state. In an asset purchase, the buyer can accept assignment of the seller's Medicare provider agreement, which keeps billing continuous but brings the agency's Medicare history with it, including any overpayments later found; or it can decline assignment and seek its own certification, which means a new survey and a period without Medicare billing. Most buyers of going-concern agencies keep the enrollment one way or the other; see asset purchase vs stock purchase.

Medicare adds a rule specific to home health. An agency that undergoes a change in majority ownership within 36 months after its initial enrollment or its most recent change in majority ownership generally cannot pass on its enrollment and provider agreement: the buyer has to enroll as a new agency and go through a new survey or accreditation, with limited exceptions. A lender will check the agency's enrollment date and ownership history before anything else. An agency that is young, or that changed hands recently, may be a much less valuable purchase than it looks.

Check the agency's Medicare enrollment date and its ownership history before signing a letter of intent. The answer can change what the business is worth.

The state license follows its own rules: many states require approval of a change of ownership, and some limit new agencies through a certificate of need, which makes an existing license more valuable and its transfer more important. Accreditation, where the agency uses it for Medicare, has its own notice requirements. Each is a closing condition a lender will list; see change-of-control consents.

Payer mix, referrals and reimbursement risk

A home health agency's price is set by others. Medicare pays under a national payment system that it updates every year; Medicare Advantage plans pay what their contracts say, often less; Medicaid rates are set by each state. Lenders therefore look at the payer mix, at how the agency's margin would change under a plausible rate cut, and at whether the agency's Medicare Advantage contracts can be kept by the buyer.

Referrals matter as much as rates. Most patients come from hospitals, physician practices, skilled nursing facilities and discharge planners. An agency that gets a large share of its admissions from one hospital system or a few physicians carries concentration risk even though its payer is Medicare. Lenders ask for admissions by referral source over several years, and they notice when the seller is personally the relationship with the biggest one. The same logic is set out in how customer concentration affects acquisition financing.

Then there is the look-back. Medicare and its contractors review claims after payment, and can recoup payments they decide were not supported. Lenders ask for the agency's history of documentation requests, audits and recoupments, its survey results and quality ratings, and whether it has a working compliance program. The buyer and every key employee must be free of exclusion from federal health programs. Where the buyer is taking on the agency's history, through a stock purchase or an assigned provider agreement, lenders expect the purchase agreement to protect against pre-closing liabilities, often with an escrow or holdback; see escrows and holdbacks.

Receivables: collateral with a catch

A certified agency carries meaningful receivables, and a receivables line is a natural partner to the acquisition loan. Asset-based lenders typically advance 80% to 90% of eligible receivables and treat anything more than 90 days past invoice as ineligible; in healthcare, eligible receivables are measured at what each payer is expected to actually pay, after contractual allowances, not at the gross amount billed. But Medicare and Medicaid payments are subject to anti-assignment rules: a lender cannot take a direct assignment of government payments. Lenders that finance healthcare receivables work around this with deposit-account arrangements, where government payments land in an account in the agency's name and are swept to the lender. See lines of credit for home health agencies and deposit account control agreements.

Closing also creates a cash gap. Billing systems, payer enrollments, bank accounts and claim submissions all have to be updated to the new owner, and payments can slow while that happens. Lenders expect the working capital at close to carry payroll, which in this business is most of the cost, through that gap.

Administrator, clinical manager and clinicians

Medicare's conditions of participation require a certified agency to have a qualified administrator and a clinical manager, and states add their own requirements. In small agencies the seller often fills one of those roles. SBA's rules for a complete change of ownership do not allow the seller to stay on as an owner, officer or employee; the seller may consult for up to 12 months, or up to 24 months for loans made under SOP 50 10 8.1 from 1 October 2026. So the file needs a qualified administrator and clinical manager from the day of closing, whether that is the buyer, a staying employee or a new hire.

Beyond leadership, the agency's capacity is its nurses, therapists and aides. Lenders ask about turnover, reliance on contract staff, and whether the clinicians are employees or contractors. For non-medical agencies, caregiver recruiting is the constraint, and wage rates, overtime and scheduling are the largest cost lines, so lenders test them in the projections rather than taking the seller's last year as given. A buyer without clinical or healthcare management experience can still finance an agency, but lenders will look hard at who runs it; see whether lenders require industry experience.

How the purchase is usually structured

For a single agency bought by an operator, SBA 7(a) is the common senior loan, and it can finance a purchase of the agency's shares as well as its assets. The buyer puts in at least 10% of total project costs. A seller note counts toward that injection, for up to half of it, only on full standby for the life of the SBA loan; a note paid currently is allowed but counts as debt. SBA prohibits an earnout to the seller, so a price that depends on post-closing admissions or collections has to be fixed at closing; see seller notes and SBA's full-standby rule.

Where the amount financed, less appraised real estate and equipment, exceeds $250,000, SBA requires an independent business valuation, and the loan for the purchase cannot exceed it. For loans made from 1 October 2026, a change of ownership must show 1.25x debt service coverage on historical results, amortizes over no more than 10 years except for any real estate, and requires financial due diligence, with a quality of earnings report on acquisitions of $3 million or more excluding real estate. For a home health agency, historical results means the agency's own reimbursement history, not a projection of better rates.

Larger agencies, multi-state groups and sponsor-backed buyers typically use conventional senior debt or private credit, which commonly runs 2x to 3.5x EBITDA, paired with a receivables line. Above the SBA limit, see financing an acquisition bigger than the SBA limit and SBA 7(a) vs a conventional acquisition loan.

What goes in the file

The standard acquisition documents apply, set out in what lenders need to finance an acquisition: the agency's business tax returns for two to three years, its P&L and balance sheet, its latest full year of figures (never an older year), a year-to-date P&L, the debt schedule, the signed letter of intent, and each 20% owner's personal tax returns and personal financial statement. For a home health agency, add:

• The state license, Medicare enrollment records and ownership history, accreditation, and any certificate of need.
• Revenue and visits by payer, with the Medicare Advantage and Medicaid contracts.
• Receivables aging by payer, with days outstanding.
• Admissions by referral source for several years.
• Survey reports, quality ratings, and the history of audits, documentation requests and recoupments.
• The agency's Medicare cost reports, if it files them, and a staff roster with credentials, including the administrator and clinical manager after closing.

Once those are in, Transparent builds the lender package, the financing model, lender presentation, blind teaser and underwriting memo, in a day, and takes it to lenders in its book that finance healthcare services. What the package contains is on the package; if the agency's receivables will carry a line, the borrowing base page explains how it is sized.