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Funding a Care Home Purchase with a £600,000 Secured Loan

Published on 2nd December 2019

If you have clients who are interested in setting up and operating a care home, they may be looking at a business with real prospects.

Life expectancy in the UK has increased by around 20 years since the 1960s. The good news is that many of us can expect to celebrate our 90th birthday, even if we probably can’t all expect to be able to live independently at that age. It is a statistic that means plenty of opportunities for anyone with the skills and the necessary patient and caring approach to run a care home.  

However, you may need to make them aware that, although it is possible to set up a new care home in suitable premises, these days there may be major hurdles to overcome which can make it uneconomic to do so as a small business. Operators will need planning permission from the local authority to change the use of any property into a care home, and very few properties exist that are suitable for this type of conversion.

They will also need to comply with the requirements of the Care Quality Commission (CQC) the independent regulator responsible for care home regulation standards in England (similar bodies serve Scotland and Wales) Buying an established business may be a simpler route into the business for a small operator, or a newcomer.

It has three important advantages:

  • It will already have residents and so provide a revenue stream from day one
  • It will comply with all the necessary regulations and have the necessary licenses in place
  • It reduces the cost of borrowing - lenders are usually happier lending to an established business which can demonstrate viability with positive accounts over previous years. 

The costs of buying a care home business can be high. In most cases, it will involve a property purchase. In many parts of the country, suitable property in good condition will command a high price.

However, the high cost of the property can actually help you buy your business. It can act as the security for a loan or Commercial Mortgage, providing a cost-effective way to provide the necessary funding with a long payback term.

Do you need an innovative approach to funding for your clients? Partner with us at Rangewell and help your clients' businesses thrive

How we helped buy an Oxfordshire Care Home

We were recently approached by an advisor whose client was an experienced geriatric nurse and care home manager who wanted to buy an established care home in a small town in Oxfordshire. It already had 25 residents and was generating a profit, and she saw that had the potential to expand.

The home was a converted house with a small garden, and the asking price of £600,000 reflected local property values.

The client needed to raise an additional £300,000 to buy the home as a going concern.

Finding a solution

At Rangewell, we have specialists who understand the care sector - and we can work with owners and their advisors to help find financial solutions required.

Our team looked at the figures and searched our lenders for the most cost-effective solution. We found several possible ways to fund the purchase, but the most cost-effective was a 15 year Commercial Mortgage which we were able to arrange with the specialist property division of a high street bank. 

This effectively turned a financial disadvantage - the high cost of the property - into an advantage. By using it as the security for long-term mortgage lending, it allowed the funds to be provided at the lowest possible cost.

Repayments would be affordable, and well within the projected revenue to be generated by the business. 

The funding Rangewell provided:

£300,000 at 3.50% above base rate (currently 0.75%) over a 15 year term

Current monthly repayments £2,257

Annual cost 27,084

We helped the advisor's client secure the mortgage and take over the business. She is now looking at extending her property to provide additional rooms which will allow her to welcome additional residents - and increase the profits her care home business can generate.

At Rangewell, we can work with you as an advisor to help you find the solutions your clients need. Loans, Asset Finance, Commercial Mortgages, or any other kinds of business finance - our expert teams find the most appropriate solutions whilst our network of lender contacts and our unique online tool let us find the most cost-effective rates.

Our service is independent, fast and absolutely free. Find out more about partnering with Rangewell and helping your clients source business finance today.


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Richard Mitchell

Richard Mitchell

Content writer