Care Home Finance - Why Is It Different?

With many commercial property sectors struggling to survive, there is one that is currently very buoyant – the care home market.  Why should this be?  Mainly it’s a combination of two factors.  One is the rising elderly population.  The other is a shortage of care homes – many have closed in the last few years since new regulations came in, requiring more stringent conditions.

With demand exceeding supply, now is a good time to get into this market.  But if you’re looking for care home finance, you have to be aware that the care home business isn’t just an ordinary business – it’s highly specialised.  You need to combine business acumen with a real interest in, and experience of, caring for this particular client group.

So how is care home finance different from a commercial mortgage for any other kind of business?

• The lender will want detailed information about the business – location, history, accounts, potential profitability, occupancy levels, etc.
• They will look into your own suitability to run the business.  You don’t actually need care qualifications to purchase a care home, but you need to demonstrate that you are a fit person to run it and you need to be registered.  If you don’t have experience and qualifications, you will have to appoint a care manager to manage it on your behalf, and see that the property includes adequate accommodation for this.
• It’s important to ensure you have a large enough deposit.  Most estimates are that you need a deposit of about £100,000 to purchase a care home.
• Before agreeing the care home finance, the lender is likely to check that the property complies with regulations on such matters as room size and safety issues.  They will also check that you have the budget to maintain minimum staffing levels.
• The lender may want to see the most recent CSCI (Commission for Social Care Inspection) reports.  The CSCI is the regulatory body that carries out regular inspections of care homes and provides reports that are in the public domain.  If a home fails the inspection, it can potentially be closed down.

As you see, obtaining care home finance is not as straightforward as obtaining other types of commercial finance.  This is understandable as a care home is not an ordinary business – the welfare of vulnerable people depends on it being run properly.  From the point of view of the lenders, they need to know that it’s a viable proposition for you – if you can’t make a go of it, they could lose their money.

So if you’re the right sort of person, it’s a good business proposition.  But don’t go into it just to make money – there’s much more to it than that.

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