Running or investing in a care home, whether buying a new site, extending existing facilities or carrying out vital refurbishment work, often requires quick access to capital. Traditional financing routes like commercial mortgages can take weeks or months, and may not suit every scenario. That’s where a bridging loan can be a powerful tool for care home businesses.
What is a bridging loan?
A bridging loan is a short‑term form of finance designed to “bridge” a gap between needing funds now and securing longer‑term finance later. In property markets, bridging loans are often used when timing is critical, for example, to secure a property at auction or fund urgent renovations.
These loans are typically secured against property and are repaid once you have long‑term funding in place, such as a commercial mortgage or through the sale of another asset. Most terms run from a few months up to around 24 – 36 months.
Why care home owners might use a bridging loan
Care home businesses face unique opportunities and challenges:
1. Buy urgent opportunities
Properties suitable for care homes don’t come along often. If you spot a good deal, especially at auction, acting quickly with a bridging loan can make the difference between securing the purchase or losing out.
2. Fund renovation & expansion
Many care homes require refurbishment to meet regulatory standards or accommodate extra residents. Bridging finance can quickly unlock capital to complete these works without waiting for slower long‑term lending.
3. Improve cashflow
If you’re between financing rounds or waiting on longer‑term loans to complete, a short‑term bridging loan can cover immediate costs, letting the business continue trading and growing without disruption.
Cost considerations: Know what you’re getting into
Bridging loans are typically more expensive than traditional mortgages:
- Interest rates: Often charged monthly rather than annually. Commercial bridging loans in the UK can range from roughly 0.6% to 1.5% per month, depending on the lender, loan‑to‑value (LTV) and security offered.
- Fees: Arrangement, legal, valuation and broker fees are common and can add significantly to the total cost.
- Short terms: Most bridging finance is designed for short periods (e.g., 6–24 months), and costs can compound if not repaid on schedule.
Because of this, it’s essential to factor all costs into your plan, and one good way to do that is by using a bridging loan for care home calculator to estimate monthly interest, fees and overall cost before you commit.
How to decide what’s right for you
When choosing finance for a care home, consider:
Your exit strategy
Bridging finance should be part of a clear plan, for example, refinancing onto a commercial mortgage or selling another asset. Without a well‑defined exit strategy, you could face costly extensions or default risks.
Loan‑to‑value and security
Most lenders offer up to around 75 – 80% LTV based on property value, though specialist deals can go higher with additional security.
Compare options
There’s no one‑size‑fits‑all solution. Some lenders specialise in care home finance, and the best bridging loan for care home projects will match your timeline, security and cost expectations. Always compare products and consider working with a broker.
Practical tips before you apply
- Use a calculator: A bridging loan calculator gives you a clear picture of total cost, interest and fees.
- Plan your repayment: Know how you’ll exit the loan, be that refinancing, sale or longer‑term funding.
- Seek expert advice: Speak with us today to get tailored guidance.
Final thoughts
Bridging loans can be a valuable tool for care home owners needing fast, flexible finance for purchases, renovations or expansion, as long as you approach them with a clear plan and a realistic understanding of costs.
When used wisely, and paired with tools like a bridging loan calculator and professional advice, they can provide the boost your care home business needs at exactly the right time.