FAQs
Frequently asked questions regarding finance for buying a care home
What can a broker do for me that I can’t do myself?
A specialist healthcare broker such as Chandler and Co have the relevant contacts within the industry to ensure a smooth transaction and make sure that the most competitive funding available is achieved.
Are banks still willing to lend in the current climate? Are interest rates reasonable?
The healthcare sector is a favoured sector by many of the lenders. To gain the most competitive funding, it is advisable to use a specialist healthcare broker such as Chandler and Co.
My bank says they can get me the funds I need?
Your high street bank manager may be able to offer you funding for your purchase but it may not be the most competitive package in the market. Also bear in mind that with an ever changing market your local bank manager may not have enough of an understanding of the industry to be able to advise you on whether you should buy the home – talking to a specialist / expert is essential.
It is worthwhile keeping your options open. An approach to one or two lenders may not give a fair reflection of the marketplace, or a reasonable opinion of how competitive the facility offered actually is.
How do I arrange finance to buy a Care Home?
It is important to remember that Care Home funding is individually assessed and will even vary from purchaser to purchaser on the same business; therefore it is vital that you have specialist advice.
Working entirely in the Care Sector, Chandler & Co have access to every lender in the country and will give impartial, well-informed advice.
I am seeking to buy an additional care home and currently have an inter-company loan. Will this be considered by a lender?”
An inter-company loan will form part of a lender’s debt serviceability review, thus you will be required to confirm any repayment terms for lender satisfaction.
I am buying a care home, who can be a Nominated Individual?
The Nominated Individual is a person appointed by the care provider organisation (e.g. a company or partnership) to act as the key liaison with the CQC. This individual has overarching responsibility for the quality and safety of care services. Link to Skills for Care Handbook
I am seeking finance for my next care home purchase; do I need to provide my updated CV?
Yes, you will need to prepare a complete CV of all shareholders/directors/partners/senior management when collating support for a finance application, with no gaps in the history.
Do you consider the sustainability of the figures in a finance application?
Yes, as a finance broker, we will look at the sustainability of the financial and management information in readiness for the lender underwriter due diligence.
I am looking to scale up after purchasing my first care home; will the lender want access to the trading information of my current care home?
Yes,
lenders will usually want to assess the trading performance of your
operating care home as part of their debt serviceability review.
What steps can I take to scale up my care home business?
See our Guide - Key considerations when growing your care home portfolio.
I am looking at refinancing my care home; what steps should I take?
See our guide HERE
How is a variable finance sanction interest rate loan margin arrived at?
A lender will consider the customer’s risk rating, loan term and security type to produce the interest rate plus base rate.
When purchasing a care home when should I appoint a solicitor?
We recommend holding off instructing legals until the valuation on the proposed care home purchase comes back, just in case there are any major issues.
Within the business plan submitted with the loan application what should I include in the forecast?
It is best practice to include a 12 – 24 month Profit & Loss account, Balance Sheet and cash flow forecast or at least a cash flow for the next two years, demonstrating forecast covenant compliance.
What happens when a 5 year term loan comes to an end?
A lender would typically look to renew the loan at this point for a further 5 year term subject to a credit assessment of the business at the time. The amortisation schedule could also be discussed at this time with the option to reduce or extend the remaining years of amortisation, with market forces at the time impacting whether the interest margin increases or decreases.
Can I get pre-finance ready to help me buy my next care home?
The team at Chandler & Co. work with new and existing care home providers to ensure that an application for finance has the best chance of success.
Here are a few Tips to ‘get finance ready’ ahead of your next care home acquisition:
- Have a clearly defined business plan
- Include an executive summary
- Provide your career background
- Relevant experience
- How far is the target care home from your base/existing services?
- Provide a brief synopsis of the care home’s staffing structure
- How often will you visit the care home, what oversight will you have? Clarify your care home business structure and beneficiary owner(s)
- An expanding care home group will need to consider lending and tax implications contact your professional adviser Set out the details of your target care home business Review the latest Regulator reports Research local competitors to the target care home Research local demographics and funding whether private, local authority or CHC Obtain local authority reports, especially if the care home has an historic older rating
- Carry out a review of your financial and funding requirements At Chandler & Co. the team will assess the EBITDA and financials of the target care home including a stress test for debt service cover
- Obtain the care home’s occupancy details of the current and latest 6 months
- Review the ratio of privately funded: local authority
- Obtain a report of latest fees charged The Chandler & Co. independent specialist care home broker will take into account your loan term and required amortisation profile Prepare current and forecast financials Update a review of your assets and liabilities, together with your personal annual income and expenditure requirements Provide proof of funds Obtain CVs of key staff of the target care home.
