Growing a care home business
Growing a care home business might seem to be an impossible task. If you have an existing business and have achieved full occupancy of your premises, there might seem to be very little that you can do to bring in additional revenue.
But increasing demands from the UK’s ageing population, which is now living longer than ever before and in greater numbers, is already putting a strain on the country’s existing care homes.
There may soon be more care home beds needed than there are available. By 2026, at current market growth, there would be an additional 14,000 people in need of care home places every year. The Office of National Statistics (ONS) figures show the population of over-85-year-olds has increased by almost a third over the last decade to approximately 1.5 million. This figure is set to grow to 3.5 million over the next 25 years.
Growing a care home business might be essential to cope with the demand - as well as providing additional revenue for you.
The business advantages of growth
To be profitable, your care home is already likely to have at least 25 residents. Finding space for a few more would obviously bring in additional revenue without creating too many demands on your existing facilities, such as staff levels or kitchen facilities.
It should be possible to add residents without major additional costs - ensuring that the additional fees will be translated directly into additional profits. The average weekly cost of living in a home is £730 with nursing and £530 without - making each extra resident you can welcome in mean an additional revenue boost of up to £36,000.
The challenge is finding additional rooms to offer to residents - while maintaining the standards of care you set for yourself, and those of CQC.
Extending your property
The solution may be to extend your property if you have your own grounds - or to acquire an adjacent property in an urban environment.
Both are major projects, requiring building work and disruption - but it may be possible to arrange both while minimising the inconvenience for your residents if you have the right funding in place.
Specialist builders exist for the medical and related sectors, who may be able to provide solutions such as conversions of unused outbuildings as well as more straightforward extensions to your premises while keeping noise and dirt to a minimum. Turning a neighbouring building into a connected annexe might also be within their capabilities.
There will be some challenges to overcomes. Remember, you will need planning permission from the local authority to extend your care home, and for the change the use of any property that you want to use as an annexe - however the need for care home accommodation may mean that they are sympathetic to your needs and that you may be able to secure planning permission that would be denied to other types of business.
The key question may be the best way to deal with the costs.
What costs are involved?
Costs will vary substantially across the country. In some areas of London, acquiring a neighbouring property when it comes on the market might require funding of £1 million or more - especially if it is of comparable size to your existing premises.
However, if you can you find the property you need, a Commercial Mortgage could help you spread the cost of buying it over 20 years or more, with rates that reflect the profitability of your business - lenders will prefer a profitable, stable business with an established record of profitability.
The cost of providing refurbishment and building work could range from a few tens of thousands of pounds to several hundreds of thousands, depending on the scale of the work required. The costs will be comparable to those of extending your existing premises - which will usually be quoted based on a square metre basis, and so depend mainly on the size of the extension required.
Remember there will be architects and surveyors fees to pay before the work even starts.
There are a number of financial solutions available. Funding this type of work might be provided with a Commercial Mortgage - or remortgage - on your existing property. This would allow you to raise a high level of funding, capable of dealing with most building projects. Rates for this type of loan may be low, sometimes as low as 2% above base rate, and you may be able to have up to 10 years to repay.
Another solution is a Secured Loan, with the security provided by the property itself, which may work in a similar way.
The other costs involved
Of course, it will not be enough to simply provide additional rooms. You may need to fit out your extended business, furnishing communal areas, and providing equipment such as medical beds, wheelchairs and hoists.
Asset Finance lets you spread the cost of this type of equipment - or assets. It includes Hire Purchase or HP. Hire Purchase agreements generally last between 12 and 72 months and require a 10-20% deposit, and can be cost-effective for spreading the cost of buying durable items.
An alternative may be leasing, which can bring in equipment with no upfront costs. This may be more suitable for items such as medical beds with a high cost and limited life - the lease arrangement may include maintenance, making planning ahead simpler - you will know all the costs involved in your purchase.
The help you need to grow your care home business
At Rangewell, we aim to find the most competitive deals for all types of finance for elderly care homes.
We know the lenders who can help when you are thinking about growing a care home business. So if you’re looking for a way to support your plans, to find out more about what we can do for you, simply call our Care Home Finance team. You can also check out more business support for care homes with our Care Home Ecosystem.