Investing in a care home agency can be a rewarding venture, both financially and socially – given the combination of growing demand for quality healthcare services and an ageing population in the UK.
However, purchasing a care home agency requires significant capital, so many aspiring care home agency buyers use commercial finance to cover acquisition costs.
Your Commercial Finance Options:
Commercial Mortgages
One of the most common ways to acquire a care home agency. A commercial mortgage is a loan secured against the value of the agency’s property.
Lenders will consider and assess the viability of the care home business, the borrower’s financial position, and the property’s valuation before approving a loan.
Commercial mortgages typically offer longer repayment terms compared to standard business loans.
Key features of commercial mortgages:
- Loan-to-value (LTV) ratios typically 60-75% of the value of the property
- Longer repayment terms compared to traditional business loans
- Fixed and variable interest rate options
- Requires a thorough plan and evidence of profitability
Business Loans
Unsecured and secured business loans are viable options for acquiring a care home agency using commercial finance. Business loans can be used to fund the purchase, as well as operational costs and refurbishments.
Key features of business loans for care home agency acquisition:
- Loan amounts vary based on business performance and creditworthiness
- Repayment terms typically from 1-7 years
- Secured loans may offer lower interest rates, however they require collateral in the form of a security
- Unsecured loans have higher interest rates, but require no collateral and often can be approved in a more timely manner than secured loans
Asset Finance (Asset-Based Lending)
Asset finance allows your business to leverage existing assets, such as equipment or accounts receivable to secure funding for your agency acquisition.
Key features of asset finance for care home agency acquisition:
- Loans are secured against business assets
- Suitable for businesses with significant tangible assets
- Asset finance offers flexibility in borrowing and repayment terms
Bridging Loans
For buyers that require short-term financing before securing longer-term funding, bridging loans present a favourable structure. Bridging loans provide fast access to capital, often used to complete a purchase while in the process/while you wait to secure longer-term financing.
Key features of bridging loans for care home agency acquisition:
- Short-term finance
- Higher interest rates reflect the short-term nature of these loans
- Faster approval process for urgent acquisitions meaning you can act on timely opportunities
Vendor Finance
Some care home agencies looking to sell may offer vendor finance. In this instance, the purchase price is paid in installments over time rather than upfront in one lump sum.
Key features of vendor finance for care home acquisition:
- Reduces initial capital outlay
- Gives you the ability to negotiate payment terms with the seller
- Vendor finance can be combined with other funding options
Specialist Care Home Finance
We work with lenders that provide specialist care homes finance, offering tailored products suited to the sector. These lenders have an intricate understanding of the regulatory requirements, cash flow challenges, and specific operational considerations specific to the care home industry.
Key features of specialist care home finance:
- Industry-specific loan structures
- Flexible repayment options
- Expertise in care home valuation and the assessment of your business’ viability
Final thoughts
Securing finance to acquire a care home agency can be the launch pad to your future care home agency success. Securing this finance requires careful planning and a demonstration of strong financial strategy. Whichever financial product you feel suits your unique situation the most, it is crucial to work with a knowledgeable commercial finance broker to help you navigate the most suitable options available to you.
If you are considering acquiring a care home agency and would like to learn more about the tailored options we have available for you, get in touch with an experienced broker to secure the most favourable funding for your business.
