Improving your EBITDA

Are you planning to expand your care home, and considering the lending criteria you will need to satisfy to secure additional finance? Benjamin Trought, Senior Relationship Manager at NatWest, offers some advice on improving your EBITDA.

To ensure your business can obtain the funding it needs, thinking about how to improve your EBITDA is a good place to start. Many lenders will have a leverage policy for care homes where they will lend up to a maximum multiple of EBITDA, perhaps 4 or 5 times. This will also give the lenders a good insight into your management ability, another key factor in making the decision to lend.

Here are some tips on how to improve your EBITDA, which will put you in a good position when speaking to lenders to secure the funding you need:

Ensure High Care Standards are Maintained.

This is the most important aspect, because if high standards are not maintained it could lead to low occupancy figures or a low CQC rating. A drop in EBITDA would then follow, which would weaken a lender’s appetite to lend. Ensuring all staff share your vision for high care standards and embrace the culture of your business is vital. Of course, providing quality care is the main purpose of running your business!

Invest in Facilities.

As a general rule quality facilities will attract premium prices. Higher fees are generally achieved where the rooms are of a good size (above 11 sq m) and have en-suite facilities. Adequate day space and additional facilities, such as a cinema room or landscaped gardens, will also be attractive facilities to have and may help you stand out from other homes. Whilst it may not always be possible to expand, keeping the home in a good state of repair and well presented with regular maintenance will help keep it attractive, enabling you to achieve higher fees.

Invest in Staff.

We are all aware of rising staff costs, as well as the difficulty in recruiting in the sector. Therefore retaining your best staff is vital, to ensure you do not become too reliant on costly agency staff and that the outstanding level of care you provide is maintained. Whilst paying above the NLW would add to your costs, it would be wise to consider what the cost to your business would be if you had to replace staff or if you had a period of increased use of agency staff to cover the shortfall.

Embrace Technology.

There are various care home care planning and management systems available which are designed to help improve efficiency, so you can spend more time providing care. Of course, better efficiency generally leads to better control of costs!

Negotiate with Local Authorities.

Whilst some local authorities pay a flat rate, there may in some instances be scope to negotiate the rates. It would beneficial to speak to others who operate in the sector, such as specialist accountants and solicitors or local care groups, who would be able to advise on this matter and give you practical ideas on how to approach this.

For further information on funding for care homes please call Benjamin on 07786 660821 or email ben.trought@natwest.com

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