With changes to Employers National Insurance alongside increases in the National Minimum Wage, care providers are assessing the impact on cash flow and looking at how to increase care home occupancy, growth and expansion alongside creating operational efficiencies.

This guide takes you through a care home refinancing process helping you as care providers to stay resilient and continue to evolve, adapt and be innovative, assisting you in making an informed decision.

Why Refinance a Care Home?

Refinancing a care home can be a strategic move to reduce costs, improve cash flow, fund a refurbishment, combine with a new loan to purchase your next care home as part of a care provision’s growth journey. 

It requires careful business planning, an understanding of an evolving care market, vision and an evaluation of financial objectives.

Refinancing involves replacing an existing loan with a new one under different terms.  You may have taken out a bridging loan previously, a fixed term loan or wish to consolidate a previous loan whilst you seek to acquire your next care home or expand your existing care provision.  A loan refinance can provide the following opportunities:

• Reducing interest rates: when reviewing the current interest rates available, you may be able to take advantage of lower monthly loan payments.
• Accessing equity: subject to a revaluation, there may be options to release built-up equity for continued investment in the care home business.
• Extending loan terms: if you can increase the loan term, you may reduce your monthly repayments to improve cash flow.
• Debt consolidation: it may be that as your care home provision has grown you have multiple loans, thus consider simplifying multiple loans into a single, more manageable payment.
• Funding improvements: finance sustainable developments or refurbishments to meet the needs of a greener environment and improve the well being for your staff and residents.

Assess if Refinancing is the Right Time for Your Care Home Provision

Before making the decision to refinance, consider the following:

• Current Interest Rates: compare current interest rates with your existing loan’s rate.
• Loan Terms: evaluate the remaining duration of your current loan versus indicative terms of a new proposed loan.
• Prepayment Penalties: check for any early repayment fees on your existing loan.
• Financial Health: ensure your annual financial accounts are filed up to date at Companies House and your monthly reporting Management Information is up to date alongside a rolling, real time cash flow.
• Regulatory Ratings : take stock of internal and external compliance audits to ensure compliance with the regulators and demonstrate an ethos of continuous improvement.
• Environment Social & Governance (ESG) : consider the level of investment required for future sustainable development in your care provision.
• Care Service Innovation: consider continued investment in innovation required as your care provision evolves.
• Market Trends: make an assessment of local demand set against the backdrop of an ageing population, supply of beds and modern facilities, level of enquiries for current provision and occupancy rates versus voids.

Steps to Refinancing Your Care Home

Evaluate your current financial position

• Review the past financial performance of your business, including fee income, the number of beds funded by the Local Authority versus private funding, occupancy trends, length of voids, level of enquires and conversion rates, operational and adjusted profit (EBITDAR).
• Lenders will review your debt serviceability to repay the loan.

Research Lenders and obtain Indicative Loan Options

• Identify lenders experienced in health and social care financing (Chandler & Co, being an independent specialist finance broker can assist you in this process).
• The Chandler & Co. Team of specialist care home brokers support you on the lending journey assisting you in the loan application process, evaluating the whole of market to obtain loan feedback resulting in lending proposals.
• As part of the loan application process you will need to provide:
• Latest filed financial statements, including a Profit&Loss statement and Balance Sheet as at your accounting year end together with up-to-date Management Information
• Tax Returns for both personal and business.
• Latest six months and current occupancy rates.
• Business plan with projections.
• The Chandler&Co Team will submit the loan application to multiple lenders to obtain and compare indicative offer terms which will include:
• Interest rate (fixed versus variable)
• Repayment terms
• Amortisation period
• Monthly repayment
• Arrangement fees
• Once you have selected a lender and agreed to the indicative terms the Chandler & Co. Team will support the valuation process. Upon completion of the valuation and acceptance by the lender the funding process will begin the completion journey.

To find our more about how Chandler & Co. can help you,  DOWNLOAD the How we help flyer HERE.