Yes, we can provide you with all the information you need to buy your first care home. We can provide you with everything you need from information about care home fees to financing your project. Speak to Rnagewell today to get your financial assessment for your care home purchase.
Care Home Finance
Find and secure funding to start or grow your care home business with Rangewell's independent team of expert advisors.Speak to one of our experts020 4525 5312
- Asset funding from 6%
- Secured loans form 2% above base rate
- Startup loans
- Jigsaw funding
- Commercial mortgages from 2% above base rate
- Refubishment loans
- Development loans
- Bridging and auction loans
- Contract finance
- Cashflow support
- Working capital
- Unsectured loans form 4.9%
Care Home Finance
Helping care home businesses find and secure the funding they need to grow
Due to an ageing population and an increased need for residential care, there is significant potential for both new and established care home businesses. In fact, at current market growth, there will be a need for over 14,000 care home places every year by 2026.
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Data from The Office of National Statistics (ONS) shows that the population of over-85-year-olds has increased by almost a third over the last decade, hitting 1.5 million. This figure is projected to grow to over 3.5 million over the next 25 years.
So, we know that care homes are a necessary business, but how do you ensure yours is both offering high-quality social care while turning a profit? All care homes must adhere to Care Quality Commission (CQC) regulations while offering competitive rates for residents. As a result, profit margins can be slim, and it's not always possible to maintain consistent cash flow.
Other factors impacting the cost of care include market competition, staff wages, utility bills and equipment acquisition and maintenance. Care businesses facing financial difficulties, or even those planning to grow their operations, will need a finance provider on their side to ensure they're always getting the best loan terms.
At Rangewell, we understand the costs and challenges that the care sector presents, and can help you find and secure care home finance to maintain and grow your care home business. Want to find out more or start a loan application today? Get in touch with Rangewell's team of independent financial advisors, or keep reading to learn more about care home finance.
Understanding care home finance
Securing the right finance solution for your current and future business needs is absolutely critical to the success of your operation.
For example, having a business loan can be a fantastic way of supporting the purchase of a new care home or boosting your cash flow, but if you take out loans on poor or unfavourable terms, you might be causing even bigger problems for your future self.
At Rangewell, we help you through every stage of the business finance process. From supporting your application to identifying common risks and scouring the market for the right lender and funding package to suit your needs - both now and in the future.
We already work with businesses across the care sector, including care agencies, children's care homes and organisations providing support for vulnerable adults. So, not only do we know how to find the right funding, but we also have an understanding of industry regulations and other challenges facing your operation.
With that in mind, we've helped businesses like yours to secure funding that helps them to:
- Buy a new care home
- Grow a care home business
- Expand current premises
- Acquire or upgrade your equipment
- Fund ongoing operating costs
- Deal with unexpected tax bills
and much, much more.
Buying your premises
Your property is key to the success of your care home, so it's critical to have the right care home mortgage from the outset.
When buying a property, there are several factors to consider. For example, recent changes to legislation have made it harder to buy and convert many older properties, because of the amount of work required to provide facilities such as lifts and widened doorways, and many larger care home providers are turning to purpose-built homes.
Finding a suitable property in the right location can be challenging. Whichever property you choose, it must appeal to the residents and their families. A large attractive building, ideally with gardens, may command a premium in many parts of the country.
How much will a care home mortgage cost?
The price of care homes typically ranges from around £400k to £2m in most regions of the UK, although substantially higher costs will be expected in London and other central urban areas.
Care home operators prefer buying, rather than leasing. Commercial mortgages work like residential mortgages, spreading the costs of acquiring property over 20 years. You may need to provide a deposit of around 40%, and it is uneconomical to borrow less than £50,000.
Refurbishment and fit-out
There will be substantial conversion and fit-out costs. The interior must be safe for residents and accessible for wheelchairs and meet a long list of regulations. Provision for fire escapes, for example, will need to be even more rigorous than those for hotels.
Contact us to find out more about refurbishment finance for a care home business.
Equipping your care home
You may need a range of equipment for your care home. A catering kitchen may be essential, and you may need specialist items such as lifts for residents who are losing mobility. Asset finance can help make the equipment you need more affordable by spreading the costs over time.
With Asset Finance, the funds you need are secured against the asset itself. This means that if you could not make the repayments, the lender would simply repossess the asset. It can also reduce the cost of the finance, as a lower risk to the lender usually means lower interest rates to you.
There are several different types of Asset Finance:
Hire Purchase lets you hire the equipment until you have paid for it. Agreements last between 12 and 72 months and require a 10-20% deposit plus fixed monthly instalments, after which the equipment becomes yours. HP may be most suitable for equipment you will use for the long term.
Leasing is much like a rental agreement. You pay a monthly charge to use the asset. With some arrangements, maintenance, and repairs will be the owner’s responsibility. It means you can easily update your equipment.
Contract Hire may be the most appropriate form of Asset Finance for your business vehicles. With Business Contract Hire, monthly charges are based on the purchase value less the estimated value of the vehicle at the end of the agreement.
Buying an existing care business
Buying an established care home could offer immediate returns, although you should be certain that the business is truly viable, and meets all the necessary regulations.
A secured loan against your property or assets could allow you to borrow the large sums required for a buy-in or buy out of an established business. You might also consider ‘jigsaw’ funding. This is a bespoke finance package made up of a number of loan types, such as a mortgage, asset finance and tax loans.
What terms will I get?
The terms for your loan will depend on your lending requirements, but most lenders will look at a maximum term of 15 to 25 years. Interest-only terms tend to be available on a 6-12 month basis.
Working Capital Finance
Operating your business will mean costs for staff, utilities and other overheads. Until you start to show a profit, you may need finance to cover these costs.
Working Capital Finance is designed to help struggling care homes, as it can boost the capital available to your business when it is not generating sufficient capital itself. It's often used to provide cash to pay staff and suppliers while business is slow during the early stages of a new business or during a period of growth when your cash flow is already stretched. It is usually designed to be repaid in short- to medium-term once your business is established and running.
Revolving Credit Facilities bring a line of credit with an agreed limit that you can call on when you need it. You only pay for the money you take out, so it can be a cost-effective way to raise funds if you need them.
Contact us to find out more about ways to smooth your cash flow.
Tax is an issue for every business. A large quarterly VAT or annual tax demand can cause problems for your cash flow, particularly when it falls at the same time as other expenses. Funding is available to let you spread the cost of your tax demands into predictable monthly payments.
Benefits of a Tax loan include:
- Better control of cash flow
- Fixed monthly payments
- Quick and simple to arrange
- Avoids issues with HMRC and potential penalties
Remortgaging your care home
To remortgage a care home, you'll likely need to have the following information:
- The latest trading accounts of the care home you're looking to finance. This will usually be 2-3 years of accounts
- An overview of your experience
- Copies of your personal bank statements for the past six months
- Proof of your identity and address
- A list of your assets and liabilities
- Occupancy for the home
- The latest CQC reports ensuring there are no issues with the care home
To find out more about remortgaging a care home, speak to Rangewell today. We can put you in touch with a specialist care fees advisor.
How to build a commercial care home portfolio
There are several ways to expand your portfolio and expand your care home group. Whether you choose to purchase an entire care home or begin a joint venture, each will have risks and rewards.
Here are some simple steps to follow to build your care home portfolio
- Be clear on your business goals and your investments needs
- Create a care home business plan
- Buy your first care home investment property
- Buy more properties over time
- Start to diversify your portfolio
It's essential to select the right option for you if you're thinking about expanding your portfolio. Speak to Rangwell today to find out more about care costs.
Should you consider alternative business funding?
Alternative business funding, such as crowdfunding and venture capital investment, might appear attractive, but it’s important to be aware of the drawbacks.
Costs can be high, raising the funds you need can mean long delays or even fail altogether, and you could even run the risk of losing control of your business. Fortunately, we can help you find better alternatives.
A new generation of business lenders has sprung up, which can adopt a more flexible approach to lending. For example, online lenders may be able to provide fast lending with the minimum paperwork. In contrast, specialised lenders can provide loans to businesses that don’t meet the criteria of mainstream business lenders.
Care home finance from Rangewell
At Rangewell, our expertise works to bring you the financial solutions you need to grow your business, whether you want to fund the acquisition of new premises, the expansion of your portfolio or even just boost operations at your current care home.
We understand the specific business challenges of running and growing a care home. We can work with you to understand them and find answers from the most appropriate lenders.
Whether you have a straightforward, small scale funding needs or require a complicated ‘Jigsaw’ funding plan made up of a combination of financial products to buy an existing business, we can work with you to find the answers and streamline your application.
Speak to Rangewell today to learn more and kickstart your care home finance application.
Last update: 24 February 2023
Frequently asked questions
Have a question?
Typically, care home lenders require a 25% to 30% deposit to purchase a care home. However, some of our lenders can look at your assets as other methods of security and therefore, the deposit amount required may be lower.
To find out more about care services, speak to Rangewell today. We can put you in touch with a specialist care fees adviser to help get you started.
Running a care home can be a very lucrative investment. It's estimated that a registered manager of a care home can make 35%-45% of the profit from fees. Let's say fees are around £250 per week per bed. So if you have a home with 10 beds, you'll stand to make a profit of £50,000 -£60,000 before interest payments.
In order to open a care home, you'll need to have a carefully considered business plan. You'll need to outline your objectives, mission, overheads. Starting a care home is expensive, so you'll need to consider your methods for sourcing finance if you don't have the capital upfront. For advice on how to get started, speak to Rangewell today.
Yes, but if you wish to own a care home, you'll need to be registered with the CQC as a care provider. To do so, you'll need to provide evidence that you have the right experience and business skills necessary to run a care home. In addition, you'll need to demonstrate that you have the right skills to organise staff, deal with admin, and deal with authorities.
Yes, Care home investment is a profitable and reward opportunity for switched-on investors who are looking to diversify their portfolios. Investors can gain a steady income to prepare and save for their own retirement and then help others retire peacefully.
For more information on social care lending, speak to Rangewell today.
Download Rangewell’s free and detailed guide to Finance for your Care Home
What types of finance are available to Care Homes and business providing residential care?
What is Asset Finance - and how it gives you a business advantage
Can finance help me increase the number of care home places my property offers?
Why not all providers are equal - finding the one that’s right for you
How we can help you pay less than 0%
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