John Mitchell, Head of Business Mortgages, explains the range of services Christie Finance offers the care home sector
When assessing the current financial climate within the care home sector, we have witnessed a withdrawal of funding from some high street banks who historically have been key supporters of care home operators. Other high street lenders who have continued to lend to the sector, must now adhere to stringent guidelines particularly towards smaller care homes, 30 beds or less, or for new buyers acquiring their first care home.
Fortunately, niche lenders are willing to fill the void created by high street banks in today’s care home funding market. As a specialist finance broker, we take a whole-of-market approach to securing competitive finance; ensuring our clients have direct access to the funding they require.
The initial rise in business distress and insolvency cases entering the Christie & Co network took place during 2017 after several years of decline. This level of distress has prevailed in 2018 as cost pressures continue to impact operator margins and profitability. Year on year increases in the National Living Wage, reliance on agency staff, associated charges and a rise in output costs as a result of Brexit weakening the pound; have all had an impact. The level of local authority fees have been challenging, particularly in instances where fee increases have been below inflation; profit erosion has further been compounded.
We have also seen business distress due to operators falling foul of an ever vigilant CQC. Poor management and governance can lead to imposed action which impacts on a home’s reputation and where an embargo is put in place, the ability to admit new residents. In this scenario there is the potential for a business to decline rapidly and fail.
As a specialist finance broker with over 40 years’ experience working within the care home sector, we are capable of supporting clients with an array of different funding requirements. We assist clients ranging from first time owner-operated buyers through to corporate investor operators. Working within the wider Christie & Co group, including Christie & Co care agents and valuers and Christie Insurance, we can provide advice for business owners at all stages of the business ownership cycle. Christie Finance predominantly provides senior debt, typically term loans available for up to 25 years as well as access to mezzanine finance.
During the early part of 2018, we facilitated the acquisition of an underperforming care home for an existing operator, despite having an excellent track record of over ten years operating a ‘good’ rated care home; our client’s incumbent bank refused to assist with the acquisition of an underperforming care home due its ‘inadequate’ CQC rating. The proposed acquisition presented an excellent improvement opportunity, however, due to the incumbent lender’s policies refusing to lend to care homes rated inadequate, their application was declined. This prompted the client to contact Christie Finance.
Working with the client we were able to advise the client on the various funding options available. In approaching the lending market, we secured an offer of finance, enabling the client to refinance the debt of their existing business on competitive terms.
Following completion, we were able to continue offering our services in sourcing an unsecured loan used to refurbish the newly acquired care home. Less than a year on from the acquisition, the business has reopened, renamed and is now operating as a good rated CQC care home.