Funding to build a new care home, convert an existing building, or extend a home you already operate.
Indicative terms
- Loan sizes commonly around £1m to £10m
- Up to 72.5% of gross development value with some specialist funders, including rolled-up interest
- Terms to three years
- Repayment typically on a bullet basis or from sales proceeds
- Pricing set by risk, loan size and your track record, with rates for stronger schemes starting in the high single digits at the time of writing
Those figures are indicative and move with the market. They give you a realistic frame for what a scheme needs to stack up against. For how development lending works across healthcare generally, see development finance.
What lenders fund
- New-build purpose-designed homes
- Conversion of existing buildings to care use
- Extensions adding bed capacity to a trading home
- Refurbishment and reconfiguration to meet current standards
- Supported living and specialist care developments
The exit is the whole conversation
Development finance is short-term money and every lender’s first question is how it gets repaid. For a care home scheme there are two credible answers: refinance onto a term facility once the home is trading and registered, or sale of the completed asset.
The refinance route is the more common and the more complicated, because it depends on reaching an occupancy level that supports a going concern valuation. That takes time after practical completion. A new home does not fill overnight.
The gap between completion and stabilised occupancy is where care home developments get into difficulty. Fund for it explicitly. A development facility that ends the month the building finishes leaves you refinancing an empty home on bricks and mortar value. Where the term facility is not yet available, bridging can cover the ramp-up period, and care home commercial mortgages explains what the eventual term lender will look for.
Registration timing
You cannot admit residents until registered, and registration cannot complete until the building is ready. That sequence sets a floor under how quickly the home can begin trading, and it is outside your control.
Build a realistic registration timeline into the funding structure. Lenders experienced in this sector will expect to see it; those that are not will underestimate it, which is not in your interest either. Our guide to healthcare regulator registration covers the process in each UK nation.
What lenders assess
- Your track record, both as a developer and as a care operator
- The build cost, the contractor, and whether the contingency is realistic
- Local demand: demographics, existing provision, commissioning intentions
- Projected fee rates and the local authority versus private mix
- The exit: term lender appetite, or the sale market
- Planning position and any conditions
Developer or operator?
Lenders distinguish between the two. A developer building to sell to an operator is assessed on the build and the sale. An operator building to run is assessed on both the build and the operating plan, which is more to scrutinise but also more secure, because there is no sale risk if the exit is a refinance.
If you are an operator developing your first scheme, expect the construction side to be examined closely. Partnering with an experienced contractor and a project manager improves the case as well as the outcome.
Common questions
Can I develop without operating experience?
Yes, if the exit is a sale to an operator. If the exit is you running the home, lenders will want to see operating experience or a credible management team.
Is conversion easier than new build?
Not necessarily. Conversions carry more cost uncertainty and frequently more difficulty meeting current care standards in an existing structure. Both are fundable; conversions need a larger contingency.
What happens if occupancy is slower than projected?
That is why the funding should be sized for a slower ramp-up than you expect. Build the pessimistic case and fund to it. It is the single most useful thing you can do at the structuring stage.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.