May 21, 2020


Julie Hopkins wrote her assessment of the care sector in the opening months of 2020 before Covid-19 took hold. We have chosen to include it as some of her points are still relevant.

2020 began with pre-BREXIT slow motion as we headed towards 31 January. As the dust settled the business climate started to feel more positive, albeit many banks remained cautious regarding the lending criteria.

Increased due diligence in application and credit underwriting has continued, but is not insurmountable with the right professional support. The last few months have seen a return to the alternative funding models which, combined with investor support and the traditional banks lending within their parameters, means that the sector continues to tackle challenges head on.

Demand for care services continues, with package availability made more challenging due to the staffing crisis which affects some areas more than others.

The traditional banks have moved funding criteria away from the smaller homes, whereas Challenger banks see the growth potential, particularly of the small groups (two to five care homes). Thus there is an increasing reliance upon specialist commercial finance brokers to source the debt funding.

Alongside the corporates there continues to be interest from business entrepreneurs, who are seeking to enter the sector or expand their existing independent portfolios. Care homes with less than 35 beds continue to be attractive to the independent entrepreneur, financed by private investors, challenger banks and, on occasion, traditional banks subject to the underwriting terms. Care homes with grounds and extension potential continue to generate interest for parties looking at portfolio growth, restructure, alternative use, and retirement supported living.

So how is care at home faring I hear you say? There continues to be a shortage of carers, with demand for packages greater than the supply of care services, and people having to either rely on families or friends as unpaid carers or have their care needs not met at all. This, combined with hospitals being at capacity, resulted in care homes experiencing full occupancy at times.

Funding local authority placements continues to be an issue, with a £1billion grant confirmed by the Government for adult social services and childrens’ services, and councils advised to utilise the 2% care precept. Unfortunately this does not address the 6.2% increase in the National Living Wage, with care services funded mainly from the local authority remaining under increasing pressure. Homecare mergers and acquisitions have continued, with established brands which offer a private service as their main income stream able to demonstrate sustainability and reinvest in the service as they seek outstanding care.

Meanwhile multi-banked facilities are increasing, with providers looking at other lending criteria to fund their vision. This has led to other banking options reaching the care sector since January, with varying loan to value percentages.

This assessment of the care sector was of course prior to the Covid-19 pandemic, but although a lot has changed since then some of the points stated above are still relevant.

Government advice on how to work safely in care homes can be found here.


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