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11/04/2014

Sam Macalister-Smith on investing in adult care home providers

In an earlier investment snapshot, James Henderson commented on how the Wales SME Investment Fund has enabled Finance Wales to invest in more businesses in the growing professional services sector in Wales.

We’ve continued to see interest from the sector and particularly from adult care home providers with Finance Wales expecting to announce its first care home investment shortly.

Care home providers currently face significant challenges in a highly regulated sector with an increasing focus on care excellence. For many, getting their business model right faced with such complexities will be the key to long-term success.

Investing in care excellence

A Department for Business Innovation & Skills review into the adult care homes sector in October 2013 called for ‘better benchmarking’ and ‘additional regulatory measures’.  Providers are increasingly being expected to demonstrate greater financial stability, as well as their long-term commitment.

Financial stability

Despite facing gearing levels higher than in many other types of business, increasingly care home providers are being expected to demonstrate their long-term financial stability. 

A strong mix of private and publicly funded clients can underpin revenues and serviceability levels.  Added to this many have benefitted from historically low interest rates in the last 5 years and will need to demonstrate their resilience to rate rises.

Gearing up for long-term growth

Caring for the elderly in the UK currently costs over £14 billion annually and this figure is rising.  The adult care sector is set for significant long-term growth, with the need for high-quality, purpose-built accommodation increasing.  Quality improvements are also having to be implemented.

For many providers, the development phase of a new extension or facility can stretch traditional lenders’ gearing covenants, even if they can demonstrate strong cash-flows.

Backing sustainable long-term growth

Finance Wales is backing more Welsh SMEs in the professional services sector than ever. If your client is a care home provider with a first-class track record and a commitment to excellence, we can use our local knowledge and expertise to see beyond factors such as gearing levels and consider a range of factors such as a provider’s ability to repay debt and historic occupancy rates, for instance.

What next?

Finance Wales has a growing track record in this sector and is keen to work with many of the local intermediaries to develop further opportunities. 

To speak to one of our locally based investment executives, please contact info@financewales.co.uk