Why care homes are specialist security
A care home's value depends largely on the business run from it. Valuers usually assess a trading care home on its earnings, taking account of occupancy, fee levels, staffing costs and regulatory standing, and also give a vacant possession value, which can be much lower. Many bridging lenders lend only against vacant possession value, or exclude operating care homes altogether.
Care homes must be registered with the relevant regulator: the Care Quality Commission in England, the Care Inspectorate in Scotland, Care Inspectorate Wales, or the Regulation and Quality Improvement Authority in Northern Ireland. Inspection ratings, enforcement action and the condition of the building all affect value and lender appetite.
When bridging fits
Bridging is most useful where speed or circumstances make a term loan impractical. Typical cases include a purchase from an administrator or a distressed seller, a home that has dropped occupancy or received a poor inspection and needs time to recover, or a buyer who needs to complete before a healthcare lender can finish its due diligence.
Closed or failing homes can also be bought for repositioning, such as reopening under a new operator, converting to supported living or converting to residential use with planning permission. In those cases lenders look at the alternative-use value and the plan to achieve it.
What lenders look for
A strong case usually includes:
- Recent trading accounts and current management figures, including occupancy and the mix of private and local authority funded residents
- The latest inspection report and any action plan
- Details of the operator or proposed operator and their track record
- A building condition report and any compliance works needed
- A clear exit, with evidence from a healthcare lender or agent where possible
Specialist valuers are normally required, which adds time and cost. We compare the lenders that consider care property and approach them with a clear, well-evidenced case. Final terms depend on each lender's valuation and checks.
Exit routes
The usual exit is a term loan from a bank or specialist healthcare lender once trading is stable, or a sale of the business and property. Healthcare term lenders typically want a period of stable trading and a satisfactory inspection rating, so the bridge term needs to allow time for any turnaround to show in the figures.
Where the plan is conversion, the exit may be development or refurbishment finance once planning is granted, or a sale with planning. Instant Quotes gives indicative figures as a starting point for commercial bridging, and we confirm which lenders consider your care property before approaching them.
