Care Home Expansion Loan
How Doulton Bridging Finance arranged £1.2m in property-backed expansion finance for a CQC-rated Good care home operator to acquire a second site within 6 weeks.
“We had been trying to get bank funding for eight months. Doulton came back to us with a credible offer within 48 hours. Six weeks later we had the keys to the second site.”
The Scenario
The operator of a 32-bed residential care home in North Yorkshire, rated Good by CQC with a 94% occupancy rate, had identified an opportunity to acquire a second home, a 28-bed dementia specialist unit 12 miles away that had come to market following the retirement of its owner-operator. The acquisition price was £1.4m, comprising the freehold property (valued independently at £1.65m) and the operating goodwill, with the operator having £200,000 available from retained earnings as a deposit.
The Challenge
The operator had spent eight months in discussions with their existing bank, whose care home team changed twice during the process, leading to repeated information requests and lost momentum. After the second account manager change, the bank reduced its indicative offer from £900,000 to £700,000, insufficient to complete the acquisition, citing 'concentration risk' in the care sector in the current credit environment. With the vendor's solicitors pressing for a completion timeline, the operator's IFA referred them to Doulton Bridging Finance to establish whether alternative lenders could bridge the gap between the bank's reduced offer and the amount actually needed.
The Solution
Our assessment established that the combination of the existing home's freehold value (independently valued at £2.1m, with a £480,000 mortgage) and the acquisition property's value (£1.65m) provided a combined security pool of substantial equity. The existing home's CQC rating, occupancy, and fee income profile also provided strong serviceability evidence, with EBITDA of £380,000 against proposed debt service of £105,000 per annum giving a DSCR of 3.6x, well above any lender's threshold. We identified three specialist healthcare lenders actively writing care home acquisition finance, two with specific experience of dementia specialist units, and presented the transaction in a structured format highlighting the security pool, the serviceability, and the management team's seven-year operational track record. Two indicative offers were returned within 48 hours.
The Deal Structure
| Facility Type | First charge over acquisition property + second charge over existing home |
|---|---|
| Loan Amount | £1,200,000 |
| Acquisition Price | £1,400,000 |
| Operator Contribution | £200,000 (retained earnings) |
| Combined LTV | 68% of combined property values |
| Rate | 6.85% fixed, reverting to lender SVR at year 3 |
| Term | 15 years, capital and interest |
| Conditions | Satisfactory CQC inspection, legal completion within 8 weeks |
The Outcome
Legal completion took place six weeks after instruction, within the vendor's timeline, and the second home was registered with CQC under the operator's existing registration within four weeks of completion, avoiding any gap in trading. In the twelve months following completion, the acquired home's occupancy increased from 71% at acquisition to 89%, driven by the operator's established reputation in the local authority commissioning network. The combined operation generated EBITDA of £620,000 in year one, a significant improvement on the projections submitted to the lender, and the operator has since approached Doulton Bridging Finance about refinancing the combined portfolio to fund a third site acquisition.