Care homes are viewed as niche assets by lenders. Following changes to legislation on

Care homes are considered a specialist asset class by lenders. Following regulatory changes around access, room sharing, and the introduction of en-suite requirements, many older converted residential properties have exited the sector or been repurposed. Modern care homes are now typically purpose-built, meaning they have limited alternative uses — as a result, lenders tend to take a cautious approach, focusing primarily on the business’s trading performance and its ability to service debt before considering the property value.

Lenders are also mindful of reputational risk — repossessing a care home is extremely undesirable and could result in negative publicity. While repossessions are rare, care homes are often sold as going concerns to other operators, and if the debt isn’t structured appropriately, lenders may face challenges in recovering the full loan value.

Strong, experienced management teams and staff are crucial. The performance and compliance standards of employees directly impact business viability; a poor CQC (Care Quality Commission) rating can make refinancing extremely difficult, if not impossible.

In practice, lenders typically offer between 50% and 60% loan-to-value (LTV), supported by a debt service cover ratio (DSCR) of around 175%. This means loan repayments, on a capital and interest basis, must be covered 1.75 times by adjusted EBITDA or CFADS (Cash Flow Available for Debt Servicing).