Financing your care home is able to be done either using a commercial mortgage or via bridging facility. The choice for you will depend on what matters most for your circumstance. Before considering which route is best, you should take time to assess:
Speed: If the need to raise funds is urgent then bridging is the route for you, as funds can often be arranged within days. A commercial mortgage on the other hand may take longer for acceptance, so bare this in mind.
Cost: If your main concern is how much it will cost you overall, you need to be aware that commercial mortgages offer much lower rates, however you will be tied into a much larger term. Be sure to check you can satisfy the duration of the payment over the long-term.
Purpose: If your need for cash is temporary only such as completing a building purchase or paying contractors to finish work, then bridging finance is the best option. If you need more long-term capital to keep the home running, then a commercial mortgage may be better suited to you.
The argument for bridging loans
• Funds can be arranged in quick time
• Allows you to get things moving before moving over to a more longer-term product
• Approval process is much simpler than conventional lending
The argument against
• Much higher interest rates
• Short term borrowing only
• Typically comes with arrangement and exit fees to pay
• Required a solid exit plan to qualify
The argument for a commercial mortgage
• Lower rates of interest apply
• Can borrow over a longer period, often up to 25 years
• Provides stability for the long term running of the business
• Useful if you need to consolidate your other debts into one payment
The argument against
• Time to be granted approval is often slower
• Relies on paperwork and documentation being in order
• Can be difficult to approve new businesses with no prior industry experience
• Not commonly suited for short-term or urgent cash needs
Why combing both could be the best option
Often it is best to combine both of the available products to properly fund your care home business. A bridging facility can be used to get things off the ground in the interim with the view to the port over to a commercial mortgage which will provide longer-term stability and finances over a number of years.
Choosing between either depends on your timing and your goals. In many cases, combining both options gives you the advantage of speed, flexibility, and long-term stabilisation.
