Care Home Debt Restructure, How We Saved Our Client Over £200,000

By James Mcgregor on Jul 23, 2020

If you own a business that currently has debt, it is extremely important to constantly review your financial position. Nothing proves this point more than a care home we have recently completed a restructure for. We were introduced to a client who was increasing their revenue in a current care home and wanted to look at plans for the future. There has been huge issues in this sector over the last couple of years and a lot of banks have completely pulled back from lending in this sector. The issues have been availability of staff, compliance, bad CQC ratings, lack of funding and numerous other factors that have made it more difficult to borrow against care homes.

Our client had another care home they wanted to close down as planning was granted to convert this in to flats. The reason for closing down is to switch the asset to a passive income and make it easier to manage. To be able to do this we needed to review the current situation of the debt structure, as there was 2,100,000 of debt against two care homes. We proposed to re-finance all of the debt on to the one care home, releasing the charge and making it feasible to close down the other care home without any issues from the existing lender. By fully understanding the clients long term goals we were able to give a full clear picture to the lender. By clearly pointing out how the client was planning to de-risk their whole situation and also how they have consistently grown their existing care home profit over the last couple of years the decision granted was positive when applying for the borrowing. This has allowed the customer to convert the other care home in to flats and should set them up nicely for a much stronger cash flow position in the next year once the flats have been completed.

We were able to negotiate a great rate of 2% over base rate for the next 5 years on the lending, this guaranteed to save our client £214,000 in this timescale. The reason for this is the current debt was on a rate of 5%. Not only were we able to save the client a huge amount of money, this also reduced the lending 5 years faster than the current lending was amortising and will allow our client a favoured lifestyle change. Overall a great outcome for all involved.

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