By Arlene Bunton, Director of Mac Research & Consultancy Limited

When lenders finance a trading care home, they assess more than the value of the property. The sustainability of the underlying business is also an important consideration because its trading income will generally be expected to service the borrowing.

Care homes operate within a statutory regulatory framework. Inspection outcomes, governance, leadership and operational quality may influence occupancy, reputation and, in some circumstances, financial performance.

Depending on the lender and the circumstances of the transaction, specialist care consultancy may form part of the operational due diligence undertaken when financing a care home. An independent quality and compliance review can provide additional insight into regulatory and operational risks that may not be apparent from financial statements, forecasts or property valuations alone.

Independent care consultancy can complement financial, legal and valuation services by providing specialist insight into operational quality, governance and regulatory compliance.

When appropriately scoped and undertaken by an experienced consultant, an operational review may help lenders, investors and care providers understand areas of operational risk that warrant further investigation, improvement or monitoring.

As regulatory expectations continue to evolve, organisations involved in financing or acquiring care businesses may place greater emphasis on understanding the operational and regulatory factors that can affect business resilience.

Operational due diligence is not a guarantee of regulatory compliance, improved business performance or the availability of finance. It is one component of a wider due-diligence process and should be considered alongside appropriate professional advice and the parties’ own assessments.