Setting up a Care Home and need a commercial mortgage? We can help
So how do you go about getting Finance for Care Homes. The search for finance or commercial mortgages for new start up care homes often ends in disappointment. Understandably new start-up businesses are by nature in a higher risk category for finance than established ones. According to 2016 published by the Small Business Administration (SBA), about 22% of small business fail in the first year.
Failed Care Homes represent an even greater dilemma for the banks as the vulnerable incumbents would need to be rehoused otherwise there would inevitably be bad press.
If you are reading this article you have probably tried to obtain finance on care home projects already. It could be your first project or indeed a new care home you are looking for in your portfolio. Quite simply the greater your experience in the care sector the more chance of your success and the better the interest rate you will be able to attract.
The Finance for Care Homes Lenders will generally not take you seriously unless you put in least a 35% deposit. They will seek personal guarantees from the directors to show you are confident in your own ability to make the care home project work.
If you are looking to finance a going concern then expect to be asked for accounts covering up to a 3 year period and all the supporting VAT returns. The chances are the Lender will also check the internet and social media for feedback on the care homes reputation and financial well-being.
The Finance for Care Homes Lender will ask for a well thought out business plan to include:
- Financial projections / cash-flow expectations.
- Detail of your reserves.
- Your personal care and business experience.
- Whether you will have a Management Team for the day-to-day running.
- Staff numbers and wage expectations.
- Demonstrate research on the location / need for a home.
- Mix between private and NHS clients.
- Residential care or nursing home.
- Contracts in place with third parties such as caterers and medical services.
- Reference to the proper safe guards in place to adhere to employment law.
- Business continuity plan and strategy.
How will the Finance for Care Homes work?
Typically the first couple of years the finance will attract a higher monthly rate. So the profit to the care home must start fast. With professional finance guidance you may be able to find a Lender that will allow a grace period of say 6 months whereby monthly repayments do not have to physically be handed over but instead are rolled into the loan but this will result in compounding the interest.
There are also products that comply with Shariah law if required.
To find out how Niche Advice could help you get Finance for Care Homes and other projects fill in the Contact Form on this website or call T: 020 7993 2044.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.