Care Home Finance for First Time Buyers

Due to an ageing population and increased need for high-quality care for elderly and vulnerable people, the care industry is booming. In fact, the industry itself is worth over £16bn a year and growing.  

So, it's no surprise that many entrepreneurs are turning their attention to the care home sector. However, it's not as simple as opening a care home and turning a profit. There are a number of factors you must consider before embarking on your care home ownership journey, including CQC evaluations, room occupancy, equipment and staffing. 

Many new owners start their careers as care home managers. With the right experience in the sector, the only thing holding you back from owning your own care home is having the right financial support. Rangewell can help you move from manager to owner by securing the finance you need to make a life-changing investment.  

Considerations for new care home owners

You and your business will also need to register and be assessed and approved by:

• The Care Quality Commission (CQC), if you’re based in England
• The Care Inspectorate, if you’re based in Scotland
• The CSSIW, if you’re based in Wales

The CQC has detailed regulations for home owners, including the need to employ suitably qualified and competent staff and the need for the premises to meet stringent health and safety standards, as well as requirements for the safeguarding and treatment of residents. It inspects homes at regular intervals, and they may be put into special measures or even struck off the register if they fail to meet the necessary standards.

Meeting standards is essential and makes good business sense. The best solution to build a profitable business is to provide a high standard of care - which will help ensure full occupancy and hence maximise profits.

But the biggest barrier to setting up a care home is money. The cost of buying suitable premises, equipping them and bringing in staff may be substantial.

At Rangewell, we work with care homes across the UK. It means we know the challenges you face at all stages of setting up and running your home - and we know the financial solutions to them.

Your care home funding needs

As a care home operator, you may need to find the right type of funding to help you when you are ready to:

• Set up a new care home
• Move from care management to ownership
• Buy an existing care home
• Acquire equipment and assets
• Provide working capital
• Support your cash flow 
• Grow your care business
• Deal with tax

Buying property to set up a new care home

Starting a care home business may be an expensive venture. Unless you already have a suitable property, your first need will be premises. A very large residential house or premises in use as an HMO may be suitable, or you may find a redundant hotel which has the necessary space, rooms and communal areas. 

Whatever property you choose, you will likely need a specialist care home mortgage that takes into account your business plan, including your financial situation and any other business assets in your name. Fortunately, we have relationships with a number of mortgage lenders who have provided funding to residential care homes like yours. So, we can help you with the application process and work to identify the best commercial mortgage solution for your needs.

The location of your care home can be crucial to the success of your business. You should carry out competitor research to better understand the comparable facilities in the local area and identify the demand for care homes in your city or town or choice.

Remember, you will almost certainly need a change of use planning permission provided by the local authority if you want to turn a private residence into a care home. 

Moving from care home manager to owner

Lenders are always assessing risk when they choose to issue finance. When financing care homes, a lender looks at the building, the quality of care, reputation and care records. They also look at the appointed owner, analysing your level of experience and plans for the future to determine how risky lending to you may be. 

Care home managers represent perhaps the most favourable form of investment for lenders looking to fund new owners. Outside of an experienced care portfolio owner, care home managers bring the most experience and demonstrable record of care to the role. Moving into ownership from management simply requires finance and robust business planning - both of which a lender can assist with. 

The key thing about moving from manager to owner is to find a lender that supports your journey. Here at Rangewell, we can help you understand the lender's market, identify the right prospects and choose a provider that not only issues capital but also supports your journey into ownership.

We'll lend our support not only in helping you navigate the lender's market, but also in negotiating the loan you need and helping you strengthen your business plan. 

Buy an existing care home

You may also be considering the acquisition of an existing care home. Depending on the purchase arrangement, you may benefit from an established reputation, positive room occupancy and even talented staff. However, a successful care home will be expensive to buy - so you may opt for improving a struggling care home instead.

Whatever state the care home is in, you will likely benefit from an immediate revenue - but you also have costs to pay from day one, such as utilities and staffing bills. 

You may also find that buying an existing care home reduces the cost of borrowing - lenders are usually happier lending to an established business which can demonstrate viability with positive accounts from previous years. We can help you secure solutions to let you buy into an established care home. 

Funding equipment for your care home

If you are setting up a business in the care sector then you will need to consider the cost of buying, maintaining and preparing equipment. 

If you plan on providing nursing care, you will be faced with a long list of medical equipment, from beds and wheelchairs to hoists, to provide medical beds, wheelchairs and hoists. You may need to fit out a kitchen capable of producing large numbers of meals, as well as business items such as a computer and printer.

Asset finance lets you spread the cost of the equipment - or assets - you need. There are two key types of asset finance:

• Hire Purchase allows you to spread the cost of items such as seating and tables that you expect to give long service for the long term. HP agreements generally last between 12 and 72 months and require a 10-20% deposit plus fixed monthly instalments. 
• Leasing operates like a rental agreement. You pay a monthly charge to use the asset. For example, you might choose to lease your IT equipment, which can provide the extra peace of mind that comes from knowing if something goes wrong, the lease company can be responsible for dealing with it.

 Cash flow finance for care homes

Cash flow is a challenge for any business. If you are faced with many high costs simultaneously, you could find that you are struggling to meet the demands of running your business. From paying your staff through to maintaining equipment and repaying your mortgage, there will likely be significant outgoings before you start to turn a profit.

Cash flow support and working capital finance can provide cash to deal with overheads and keep your business in the black. It is usually designed to be repaid in short to medium-term once your business becomes profitable. Find out more about cash flow finance for care homes.

Insurance cover

Your new business will require insurance protection. As a minimum, you will need need to arrange:

• Employers’ liability insurance - to cover claims from staff who are injured or harmed at work. Lifting elderly patients is a serious risk for carers and can result in back injuries, which may be judged to be the responsibility of your agency
• Public liability insurance - to cover claims made by clients and their families for injury or damage. 
• Professional indemnity insurance - to protect your business if you make decisions that result in loss, damage or harm
• Medical malpractice cover -and treatments liability insurance - to deal with issues relating to giving medication

You may be able to find an insurance package specifically tailored for your agency which combines all these types of cover from a broker familiar with the sector. However, the premium is still likely to be high - at Rangewell, we can find solutions which will let you spread the cost of the cover you need.

Tax loans for care agencies

Running a care agency will mean tax, and a large quarterly VAT or annual tax demand can cause problems with cash flow. Tax loans can help you spread the cost of your tax demands into affordable monthly payments. They mean that your care home business can have:

• Better control of cash flow
• Fixed monthly payments
• Quick and simple to arrange

It can also ensure that you avoid late payment issues with HMRC, with the potential penalties and reputational damage that can follow.

Care home finance from Rangewell

Your new care home business may present a number of funding needs. At Rangewell, we have a team of specialists with access to the whole of market, including a number of specialist care home lenders, to help you find the best funding to grow your business. We use our expertise to find funding for your care home, including professional loans, unsecured and secured loans.

Get in touch with Rangewell to learn more about applying for finance for your care home acquisition.