When I tell a buyer we can sometimes raise more than a care home's property is worth, I get one of two reactions. People who know the sector nod. Everyone else assumes I have made a mistake.
No mistake. Care homes are one of the few asset classes where the lending is not really about the building at all, and once you understand why, the whole market makes more sense - including how a loan can be worth more than the building securing it. So let me explain it the way I explain it across a table.
A care home has two values
Take a 40-bed home somewhere in the South East.
Empty - no residents, no staff, no registration - it is a large building with an institutional kitchen. A surveyor might call it £1.5m. That is the bricks and mortar value, and it is how most people assume lending works: some percentage of £1.5m.
But nobody is buying an empty care home. They are buying a trading business: 38 residents in place, a settled staff team, a CQC registration, relationships with the local authority, and the fees that flow from all of it. Valuers call this the going concern value, and it is built on the home's earnings, not its floor area. If that home produces, say, £450k of adjusted earnings a year, its going concern value might be £2.6m or more.
Care home lenders lend against the £2.6m, not the £1.5m. A loan at 70% of going concern value is £1.82m. Measure that against the bricks and mortar and it is over 120% of what the building alone is worth.
Nothing exotic is happening. The lender is simply valuing what you are actually buying - a business - rather than the building it happens to live in.
That is the whole trick. It is not more than the price you are paying, and it is not free money - your deposit is measured against the going concern value, and most buyers put in somewhere between a quarter and a third of it. One honest caveat: the exact percentages move constantly. Individual lenders run high loan-to-value offers when their appetite is strong and quietly withdraw them when it is not, so treat any specific headline number as a snapshot, not a promise. The mechanism is what lasts. But it means the property is doing far more work as security than its own value suggests, which is why care home buyers can gear further than almost any other kind of business buyer.
What actually drives the valuation
Because the value sits in the trading, the valuation lives and dies on a short list of numbers. These are the ones every credit team I deal with goes to first.
Occupancy, and how it got there. The sector average is just under 89% and has been climbing for years. A home sitting at 90%+ with a waiting list is easy to fund. A home at 75% needs a story, and "the previous owner stopped trying" is only believable if the rest of the file backs it up.
The fee mix. Private-pay residents at £1,400 a week and local authority residents at £900 a week are very different income. Neither is wrong - local authority income is steadier, private fees are richer - but a lender prices the blend. The national average weekly fee is now around £1,300, and where a home sits against its local market matters more than the headline.
The margin. Valuers work off EBITDARM - earnings before the owner's rent, interest, tax and management costs. A well-run home converts around 30% of revenue into EBITDARM. Materially below that, the valuer asks what is wrong; materially above, they ask what has been left out, usually the true cost of a manager.
Staffing. Agency staff are the number I check before anything else. A home leaning heavily on agency workers is more expensive, and it usually signals a deeper problem, because carers leave managers, not buildings. Lenders read agency spend as a proxy for how the home is really run.
The CQC rating. This is the one that surprises buyers. A Good rating keeps every lender at the table. Requires Improvement thins the room and adds margin to your rate. An embargo empties it. The inspection report is as much a part of your loan application as the accounts.
Lenders also lend to you, not just the home
The same home gets different terms depending on who is buying it.
An experienced operator adding a fourth home borrows on the strength of their track record. A first-time buyer can absolutely get funded - I arrange it regularly - but the lender will want to see care experience somewhere: a registered manager staying on after completion, or one you have already recruited. A first-time buyer with a settled, well-regarded manager in place will often out-borrow an experienced operator trying to run a home from a distance.
If you are buying your first home, secure the manager before you approach lenders. It is the single cheapest improvement you can make to your terms, and almost nobody does it in that order.
The same maths funds three different moves
Everything above applies whether you are buying, building or already own the home.
Buying. As described - the loan is set against going concern value, your deposit against the same.
Extending. Adding beds is often the best money in the sector, because each new bed arrives at marginal cost into a home whose overheads are already paid for. Lenders will fund extensions against the uplift in trading value, not just construction cost.
Releasing equity. If you already own a home that trades well, its going concern value has probably grown past what you paid. A refinance can release that equity as cash for the next purchase or the extension. This is quietly how most of the small groups you see were built - not with new money each time, but with the first home funding the second.
Where care home deals fall down
Four things kill these applications, and three of them are avoidable.
Numbers that cannot be evidenced - management accounts that do not tie back to filed accounts or fee schedules. A CQC problem surfacing mid-application, which is why I check the latest inspection position before we approach anyone. Deferred maintenance, because valuers walk every corridor and price every tired bathroom. And over-reliance on one person, usually a vendor-owner who is also the registered manager and is leaving on completion day with every relationship in their head.
None of these mean a deal is dead. They mean the file needs to answer the question before the credit team asks it. A dip explained with invoices is a footnote; the same dip unexplained is a decline.
How the best terms actually happen
There are high street banks, specialist healthcare lenders and challenger banks in this market, and they do not want the same deals. Some love first-time buyers with a strong manager. Some only want groups. Some are hungry in regions where others are full. That appetite shifts quarter to quarter, and knowing where it sits this quarter is most of what a good debt adviser is for. To be clear about our role: we are debt advisers and whole-of-market commercial finance brokers. We are not a lender, and we do not work for any bank - we work for you.
My job is to know which three lenders want your deal before you apply, and to put the file in front of them in the shape their credit team reads it - occupancy history, fee schedules, staffing, CQC position, all answered on page one, so it moves through in weeks instead of months. When lenders know a file is being seen by their competitors, the terms sharpen. That is not a trick; it is just how the market works when it is made to compete.
And the honest version of the fee conversation, because I would want it too: you pay nothing to start. We agree the fee upfront, we bring back indicative terms, and you only pay if you are happy with what we bring. If we cannot get you terms worth having, you owe us nothing.
If you take one thing from this
The building is not the ceiling. A care home borrows against what it earns, and a well-run home can raise more than its property is worth - to buy it, to extend it, or to fund the next one.
Which means the numbers that decide your terms are the trading numbers, months before you ever apply. If a purchase, an extension or a refinance is anywhere on your horizon, start the conversation early. The homes that get the best terms are the ones whose story was ready before the market was asked.
This is general information, not advice. Lending is always subject to status and lender criteria. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Frequently asked questions
Can I really borrow more than the care home's property is worth?
In the right circumstances, yes. Lenders value a trading care home as a going concern - the business, the registration and the property together - and that figure is usually well above the bricks and mortar alone. A loan set against the going concern value can work out at more than 100% of the property value. How far above depends on the lender's current appetite, the home's trading record and yours - specific high loan-to-value offers come and go, so always check what the market is offering when you apply. Everything is subject to status and lender criteria.
I have never run a care home. Will anyone lend to me?
Some will, on conditions. Lenders want to see relevant experience somewhere in the room - if not yours, then a strong registered manager staying on, or an experienced operations director alongside you. First-time buyers get better terms with a settled management team in place than any business plan can win on its own.
What deposit do I need?
Most care home deals complete with the buyer putting in somewhere between 25% and 35% of the going concern value. It can be less where there is additional security, for example equity in another home or property. Because the going concern value usually exceeds the property value, your cash contribution can look small next to the bricks and mortar - that is the going concern effect working in your favour.
Does the CQC rating really affect the loan?
Directly. A Good or Outstanding rating keeps the whole market open to you. Requires Improvement narrows the field and usually costs more in rate and conditions. A home in special measures or under embargo is close to unfundable on normal terms until the position recovers. Lenders read inspection reports as carefully as accounts.
Can I release equity from a home I already own?
Yes. If your home is trading well, a refinance against its going concern value can release cash for an extension, a second home, or to replace expensive debt. This is how most small groups grow - each well-run home helps fund the next one.
How long does care home finance take?
Plan for two to three months from application to completion, and longer if the CQC registration transfer is complicated. If a seller is pushing a shorter deadline, short-term finance can bridge the gap with the mortgage agreed behind it - it costs more for a few months, but it wins time-critical deals.