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An ageing population and growing demand make investing in care homes appealing. The UK has about 15,100 care homes (England), and official ONS figures put registered beds at 461,958 and residents at 372,035 for the year to February 2023. Occupancy has been improving since the pandemic low: ONS recorded 80.5% for that same period, while more recent industry trackers put occupancy noticeably higher – Knight Frank’s UK Care Homes Trading Performance Review reported average occupancy of 88% by late 2024. LaingBuisson’s latest market report values the residential care market at £27.3 billion in 2025/26, and ONS population projections show the number of people aged 85 and over roughly doubling over the coming decades, the core market for residential care. These factors drive care home acquisition and expansion. Specialist financing can help operators buy existing homes or build new facilities to meet this demand, potentially providing stable returns as the sector grows.
Table of Contents
Key takeaways
- Care home finance can fund acquisitions, new developments, refurbishments and equipment purchases. The right product depends on the operator, property, project stage and funding timescale.
- Lenders focus heavily on CQC ratings, occupancy levels, trading performance and the experience of the management team. Strong accounts, realistic forecasts and a clear business plan can materially strengthen an application.
- Commercial mortgages are typically used for established purchases, while development finance supports construction and expansion projects. Bridging finance and asset finance can cover urgent acquisitions, short-term gaps or equipment costs.
Commercial mortgages for care home purchases
A care home mortgage is a commercial mortgage for the business of running a care home. Lenders typically offer loans covering perhaps 60–90% of the purchase price (LTV) – higher LTV (toward 90%) usually requires stronger track record or higher deposit. Loan terms often range from 1 to 25 years, with interest-only options for several years (common to allow turnover to ramp up). Rates are bespoke to each deal, but available from roughly the mid-2% range plus base rate. Because care homes are specialised, rates and deposits are generally higher than for typical buy-to-let: lenders price in the operational risk.
Care home mortgages are usually arranged via specialist brokers (like Rise Funding) who can compare lenders and match your profile. Each application is custom: lenders examine the property, the management team and finances. Banks will often require evidence of robust cashflow (see below) and expect a significant initial equity stake. Top lenders (including newer entrants like Allica Bank) are targeting smaller operators and first-time buyers, but all will vet the applicant’s plan carefully.
Development finance for new-build or expansion projects
Development finance funds construction or conversion projects for care homes. Funds are drawn down in stages as work progresses, with lenders usually advancing up to around 70–75% of gross development value. This means you need to cover land cost and some build cost yourself or with equity. Typical facilities are short-term (1–3 years) and often repaid via the sale or remortgage of the completed asset (or as an exit refinance). Interest is higher (from roughly 8%+ per annum) to reflect construction risk.
Development lenders will expect full plans, budget, and contracts in place before release of funds. Because care home construction has specialised standards (e.g. bedroom sizes, accessibility, staffing ratios), having an experienced project manager or care operator on board is essential. Some loans focus on LTGDV rather than cost, so a strong exit strategy (sale or refinance once built) must be clear. Overall, care home development finance operates much like other construction finance, but underpinned by the eventual care home cashflows.
What lenders look for (CQC rating, occupancy, trading performance)
Lenders heavily scrutinise any existing Care Quality Commission (CQC) rating of the home (or equivalent regulator in Scotland/Wales). A ‘Good’ or ‘Outstanding’ rating reassures banks; a ‘Requires Improvement’ or worse can make borrowing difficult. If buying an existing home with issues, your own management experience will be tested. New operators must plan to register with CQC (which can take around 10–12 weeks) before trading. Note that lenders may even consider historic CQC reports as indicators of care standards.
Occupancy and fee mix
Steady, high occupancy is crucial. Low occupancy reduces turnover and profit, hurting affordability. Lenders check recent trading occupancy – ideally above roughly 85%. They also look at how residents are funded. A mix of self-funders and local authority/NHS-funded residents is normal, but lenders are aware that government payments can be slower and less predictable (often invoiced quarterly) than private fees. A high proportion of self-paying residents is seen as positive for cash flow. In practice, ONS data puts the England-wide average at 37.0% self-funded residents, but every home differs. Clearly demonstrating stable revenues matters.
Trading accounts and affordability
Banks will want at least 2–3 years of accounts or management accounts, plus projected budgets. Profits and cashflow must clearly cover the new loan repayments. If current trading is weak, you’ll need a strong turnaround plan. In lending terms, affordability is key: the new mortgage and operational costs (wages, bills) should leave a buffer even at slightly lower occupancy. Many lenders will stress-test occupancy or fee assumptions.
Operator experience
An owner’s track record in care is also a major factor. Lenders prefer borrowers with at least 2–3 years’ care home management experience (or coming from a related healthcare background). First-time operators can qualify, but must prove competence (perhaps via formal qualifications or a skilled management hire). High street banks typically lend only to proven operators, while specialist lenders may still consider newcomers if risks are addressed. Partnering with an experienced care group (joint venture or management contract) can strengthen a case.
Other funding options: bridging finance and asset finance
For buyers who need to move extremely fast (e.g. winning a care home at auction or urgent sale), bridging loans are an option. Bridging loans are short-term (typically 6–18 months) and unregulated. They allow you to complete quickly with minimal paperwork. For care home deals, specialist bridge lenders will lend on the property value – often up to around 85% LTV on a prudent value. Because they assume a quick exit (usually refinance into a long-term mortgage or sale), costs are higher (interest plus fees), but they fill critical timing gaps. Bridging lenders can often close in days to weeks for urgent deals. Uses include fixing urgent repair issues pre-CQC inspection or buying at auction (where completion must happen in 28–56 days). Bridging should be followed by a conventional care mortgage or sale as soon as practicable.
Asset finance
This covers loans or leases to buy equipment, furniture, vehicles or large fixtures for the care home. For example, new beds, hoists, kitchen or laundry equipment, or a wheelchair-accessible van can be funded. Asset finance (like hire purchase or leasing) typically funds up to 100% of the equipment cost, repayable over the useful life of the asset (often 3–5 years). Interest rates vary by asset but are generally higher than a mortgage. The main benefit is preserving cash and spreading cost. It can also include re-financing existing equipment (asset refinance) to release cash back into the business. Ultimately, asset finance and hire purchase are practical tools to equip and maintain the home without large upfront expense (for more on this, see Rise Funding’s guides on secured business loans and asset refinance).
How to prepare a strong funding application
To secure care home finance, being well-prepared is critical. This includes:
Financial records
Gather 2–3 years of audited accounts (or management accounts if you’re already trading), plus recent bank statements. Lenders will project forward from your latest actual performance. If trading profits are small now, prepare a realistic profitability forecast (with occupancy assumptions).
Business plan
Present a clear plan covering the care home’s market, pricing, staffing and growth strategy. Include evidence of demand (local demographics, referral sources) and how you will handle any regulatory or occupancy challenges. New-build projects need a development plan, costs, timescales and exit strategy.
Experience and management team
Document your (and your team’s) qualifications and track record in care or healthcare. If you lack direct care home experience, highlight relevant skills or partnerships. Some lenders may require a registered manager with proven credentials on site. Trade qualifications (NVQs, diplomas) or letters from previous care employers can help demonstrate competence.
Property details
Provide information about the facility – number of beds, current occupancy/fees, location, and any planning permissions (for new builds). Have recent valuations or broker price opinions ready. If buying, the sale price and contract details should be firmed up.
CQC regulatory status
Include the latest CQC report and inspection notes for each home in the deal. If you have ‘Good’ ratings, highlight them; if not, be ready to explain improvement plans. New acquisitions may need a plan for rating improvement after takeover.
Proposed funding structure
Explain how much finance you need for purchase, refurbishment, equipment etc., and how you will provide the deposit or gap funding. Clarity on source of deposit (personal, sale of an asset, investors) is essential.
Professional advice
Early engagement with a specialist broker (such as Rise Funding) and perhaps a professional care accountancy or consultant can greatly strengthen your application. They can advise on lenders most receptive to your profile and ensure all documentation is robust.
Overall, anticipate lender questions about “What if occupancy dips?” or “How quickly will the home fill up?” and prepare answers. A strong application will frankly address risks with mitigations. For first-time buyers, letters of support from experienced operators or letters of intent from care providers (to manage or supply staff) can reassure underwriters.
By understanding the care sector’s financing nuances and preparing carefully, operators can secure funding to purchase or expand care homes and meet the strong demand in this vital market.
If you are looking for a loan as a carer, Rise Funding can help find the best option for you. Whether it’s a business loan or others, we’re here to help you make a decision with confidence.
Plus, applying with Rise Funding doesn’t affect business credit.
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