Residential care home finance
Funding for CQC-registered residential care homes, where the lender underwrites the operating business: EBITDARM, occupancy, fee mix, beds and the CQC rating.
Funding residential care homes
A residential care home is a CQC-registered business that provides accommodation and personal care to people who can no longer live independently, charging a weekly fee per resident. Unlike a lease-backed supported living investment, a care home is an operating going concern, so its value and its borrowing capacity rest on how well it trades, not on a tenant's covenant.
That makes the finance trading credit secured on property. A lender sizes the loan on the home's earnings, measured as EBITDARM, its mature occupancy, the mix of private and local-authority funded fees, the number of beds, the CQC rating and the quality of the manager, and weighs the going-concern value against the bricks-and-mortar value as the downside. We arrange acquisition, term, development and refinance debt for residential care homes, and we present each home the way healthcare credit teams underwrite it.
What we fund
- CQC-registered residential care homes for older people
- Specialist residential care for dementia and complex needs
- Purpose-built modern homes with high single-room and en-suite ratios
- Converted and period homes with smaller bed numbers
- Single homes for first-time and experienced operators
- Homes bought with vacant possession for repositioning and re-registration
Indicative terms
- Typical lot size (indicative)£1m to £20m and above
- Term LTV (indicative)Up to ~65 to 70% of going-concern value
- Term rates (indicative)From around 6%
- Indicative bed value£100,000 to £150,000 per bed for modern stock (Knight Frank)
Indicative only. Terms vary by lender, asset and borrower and are not an offer of finance.
Funding a residential care home as a trading business
We arrange finance across the life of a residential care home. For an acquisition of a trading home we source a term loan sized on the home's EBITDARM and occupancy, indicatively up to around 65 to 70 percent of the going-concern value, with term rates from around 6 percent. For a home bought vacant or underperforming, we arrange bridging or acquisition finance for the purchase and turnaround, then refinance onto term debt once trading and the CQC position are re-established. For a new home we source development finance against cost. Where equity is short, we introduce mezzanine finance or equity and joint venture capital. We act as arranger and introducer, not as a lender.
Which lenders back care homes, and what they underwrite
Care home lending is led by specialist healthcare lenders, challenger banks and the healthcare desks of mainstream banks, because the credit is closer to trading finance than to property lending. They underwrite the operator and the trading: EBITDARM and its margin, mature occupancy against the national benchmark of 88.7% on the Knight Frank Care Homes Trading Performance Review 2025, the split between private and local-authority funded fees, the average weekly fee, the number of beds and the bed mix, and the CQC rating, where a rating below good can cap or block lending. They then weigh the going-concern value against the bricks-and-mortar value, the downside if the home stops trading. The manager and the staffing model matter as much as the building. We assemble the trading accounts, the occupancy and fee data and the regulatory position so the lender can underwrite the operating business, not just the postcode.
The market for residential care homes
Care homes trade in one of the most active healthcare property markets in the UK, with Knight Frank forecasting around £12bn of healthcare property transactions in 2025, more than treble the long-run average. The fundamentals support it: there are around 16,500 care homes and 465,000 beds on carehome.co.uk and Nuffield Trust data, average occupancy ran at 88.7 percent in 2025 and average weekly fees reached £1,298, up 9.8 percent, on the Knight Frank review, while bed supply per head of the older population has fallen to 26.7 beds per 100 people aged 85 and over from 33.7 in 2010 on Nuffield Trust figures. Prime modern homes price on yields around 4.5 percent on the Knight Frank Yield Guide and value at £100,000 to £150,000 per bed, with secondary stock materially wider. Exit routes are a sale of the trading business to another operator or a healthcare investor, a refinance as trading improves, or a hold on the income. We frame each home against the value a buyer and a lender will recognise.
Finance that suits this asset class
- Acquisition financeBuying a trading care home on the strength of its earnings.
- Commercial mortgagesTerm debt sized on going-concern value and debt service cover.
- Bridging financeFunding a vacant or underperforming home through turnaround.
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Fund a residential care homes deal
A view on fundability within one working day.
Is investing in care homes a good idea?
The sector's fundamentals are strong and well documented. Occupancy averaged 88.7 percent in 2025, average weekly fees reached £1,298, up 9.8 percent year on year, and operator EBITDARM margins averaged 30.1 percent on the Knight Frank Care Homes Trading Performance Review 2025, while bed supply has fallen to 26.7 beds per 100 people aged 85 and over from 33.7 in 2010 on Nuffield Trust figures. Demand is rising as supply tightens, which underpins the case.
But a care home is an operating business, not a passive investment, and that is the part the headline figures hide. Returns depend on running the home well: filling beds, managing the fee mix, controlling staff costs and holding a good CQC rating. We arrange the finance and do not give investment advice; what we can say is that lenders back the operator and the trading, so the quality of the operation is what determines both the return and the funding.
How do lenders value a residential care home?
Lenders value a trading care home on its earnings, not on a price per square foot. The core measure is EBITDARM, earnings before interest, tax, depreciation, amortisation, rent and management, which strips the home back to its operating profit, with the national average margin around 30.1 percent on the Knight Frank 2025 review. A multiple is applied to sustainable EBITDARM to reach a going-concern value, which is what the loan is sized against.
That going-concern value is then sense-checked against the bricks-and-mortar value, the worth of the building if it stopped trading as a care home, which sets the downside. For modern purpose-built stock the going-concern value commonly works out at £100,000 to £150,000 per bed on Knight Frank commentary, with older and converted homes materially lower. We present sustainable rather than peak earnings, because that is the basis a careful lender will accept.
How does occupancy and fee mix drive the lending case?
Occupancy is the first number a care home lender looks at, because empty beds earn nothing while costs continue. The national benchmark is 88.7 percent on the Knight Frank 2025 review, and a home tracking at or above that supports stronger lending than one running well below. Lenders look at mature, stabilised occupancy rather than a single month, and at the trajectory.
Fee mix matters alongside it. Private-pay residents typically pay more than local-authority funded ones, so a home weighted toward private fees usually shows a stronger, more resilient income, while a home reliant on local-authority placements is more exposed to commissioning budgets. The average UK weekly fee reached £1,298 in 2025 on the Knight Frank review, up 9.8 percent. We present the occupancy history, the fee split and the fee trend so the lender can underwrite the durability of the income.
What does the CQC rating mean for finance?
The Care Quality Commission rating is a gating item for most care home lenders. A rating of good or outstanding supports normal lending; a rating of requires improvement or inadequate raises questions about both the trading and the regulatory risk, and can reduce the leverage available or stop a lender proceeding until the rating is recovered.
Where a home has a weak rating, the deal often becomes a turnaround financed on shorter-term or bridging money, with the plan to restore the rating and the trading before refinancing onto term debt. We are upfront about the rating because lenders treat it as central, and we structure the funding around the regulatory reality rather than around the hoped-for outcome.
Is there a cap on care home fees, and does it affect funding?
Government proposals to cap the lifetime amount an individual pays for personal care, sometimes cited at around £86,000, have been announced and then delayed, and the position has shifted over time. Because the policy has not been implemented as originally framed, lenders underwrite the fee income as it is actually charged and collected today rather than against a prospective cap.
What a lender focuses on is the current, evidenced fee income and the mix of private and local-authority funding behind it. Policy risk is noted as part of the wider picture, but the loan is sized on real trading. We keep the analysis on the home's actual fees and occupancy, which is the basis credit decisions are made on.
Worked example: acquiring a trading care home
Take an illustrative acquisition: an operator buys a 50-bed CQC-registered residential care home rated good for £6m, running at around 90 percent occupancy with a balanced private and local-authority fee mix. These figures are illustrative only and not an offer of finance; any real facility would be sized on the actual trading accounts, occupancy, fees and valuation.
Suppose the home produces sustainable EBITDARM of around £600,000, in line with sector margins near 30 percent on the Knight Frank 2025 review. A lender sizing a term loan at around 65 percent of the going-concern value might advance around £3.9m, with the operator funding roughly £2.1m of equity. At an indicative rate from around 6 percent, interest of around £235,000 leaves cover against EBITDARM, the test the lender applies.
The lender's diligence runs through the operating business: the occupancy history against the 88.7 percent national benchmark, the fee mix and fee trend, the CQC rating, the manager and staffing, and the bed value, with modern stock valued at £100,000 to £150,000 per bed on Knight Frank commentary. The bricks-and-mortar value sets the downside if the home stopped trading.
As occupancy and fees grow, the operator can refinance to release equity toward the next home, or hold on the income. The finance stands on the trading, which is why we present sustainable earnings, occupancy and the CQC position first.
Illustrative worked example only. Figures vary by lender, asset and borrower and are not an offer of finance.
Frequently asked questions
Is investing in care homes a good idea?
The fundamentals are strong: occupancy averaged 88.7 percent, fees reached £1,298 a week and EBITDARM margins averaged 30.1 percent in 2025 on the Knight Frank review, with bed supply falling against an ageing population. But a care home is an operating business, so the return depends on running it well. We arrange the finance and do not give investment advice.
How is a care home valued for lending?
On its trading. Lenders apply a multiple to sustainable EBITDARM to reach a going-concern value, sense-checked against the bricks-and-mortar value as the downside. Modern stock commonly values at £100,000 to £150,000 per bed on Knight Frank commentary, with older homes lower.
Is there an 86,000 cap on care home fees?
A lifetime care cost cap of around £86,000 has been announced and then delayed, and has not been implemented as originally framed. Lenders therefore underwrite the fee income as it is actually charged and collected today, not against a prospective cap, and we keep the analysis on real trading.
What CQC rating do lenders require?
Most care home lenders want a rating of good or outstanding for normal lending. A rating of requires improvement or inadequate can reduce leverage or stop a lender until it is recovered, in which case the deal is often financed as a turnaround on shorter-term money before refinancing onto term debt.
Funding a residential care homes asset?
Tell us about the deal and we will come back with a view on fundability and likely terms.