Traditional financing from high street and investment banks is still incredibly tough to secure, with most lenders insisting on a minimum loan to value of 60%.
Lloyds bank refuses almost all lending to care homes, according to Sameer Rizvi, CFA is the Managing Partner of RD Capital Partners LLP, leading to a search by entrepreneurial operators for alternative sources of finance.
In expert analysis for Care Home Professional, Mr Rizvi says that, unless you find an asset that already operates as a cash cow, has stellar EBITDAR margins and a solid CQC history, you may need to find alternative sources of funding.
One option is crowdfunding, where a business idea is pitched on the internet to millions of small investors in return for equity or rewards.
“Crowdfunding is a growing and viable option,” writes Mr Rizvi. “No deal size is too small for a debt crowdfunding platform such as Funding Circle or Crowdcube. In fact, there is an increasing number of property technology or ‘PropTech’ platforms that lend against real estate development projects. It is just a matter of time before platforms such as LendInvest and Property Partner begin lending in other areas of commercial real estate, including healthcare real estate and thus care homes,” he predicts.