Development finance for care and supported living

How much will a development lender advance?

A care or supported living development facility is sized against two ceilings at once: up to around 65 to 70 percent of total project cost, covering land, build and fit-out, and up to around 60 percent of the gross development value of the finished scheme. The facility takes whichever figure is lower, and the developer funds the balance in equity, with loans available from around 500,000 pounds to many millions.

Where the gap between the lender's advance and the equity you want to commit is too wide, mezzanine finance can sit behind the senior loan in the capital stack and lift total leverage, at a higher price. The valuation question matters here too. A pre-let or forward-funded scheme is valued on the agreed institutional or registered-provider commitment, which supports a higher and more certain gross development value than a speculative build. A trading care scheme is valued on its projected stabilised going-concern value. We instruct the valuation to reflect the exit you are actually pursuing.

How are funds drawn down during the build?

Development money is released in stages, not as one lump sum. The lender appoints a monitoring surveyor who inspects the site, checks the work completed against the cost plan and certifies each stage before the next drawdown is advanced. You only pay interest on the funds actually drawn, and the interest itself is rolled into the facility rather than serviced monthly, so the project carries no payment burden while it has no income.

Care and supported living schemes can often be phased. A larger extra care or supported living scheme can be built and let in blocks, with a registered provider taking units in tranches as they complete, or a care home opened and its occupancy built floor by floor. Structured well, the development facility funds the build and the early phase, and the agreed pre-let or the scheme's own income contributes to later phases, reducing peak debt. We structure drawdowns around that phasing from the start.

What does a lender want to see in the appraisal?

A care or supported living development lender underwrites the scheme, the demand and the team. It wants the full cost plan and build programme, planning consent for the intended care or residential use, and evidence of demand: for a care home, a catchment study, the local-authority and private-pay fee picture and competing supply; for supported living, a pre-let, forward-funding agreement or heads of terms with a registered provider, and the regulatory standing of that provider. The revenue projection should be built bottom-up from the bed numbers or the unit mix, not asserted as a single occupancy figure.

The team is weighed alongside the numbers. A developer or operator who has delivered and run care or supported living before is a materially better credit than a first-time entrant, though first-timers can strengthen a case with an experienced contractor, a recognised operator or registered provider lined up, and a management or lease agreement in place for opening. We shape the appraisal pack so it answers the credit committee's questions before they are asked, which shows in the terms offered.

How does the loan get repaid once the scheme completes?

The exit depends on the scheme type. A supported living or extra care scheme pre-let or forward-funded to a registered provider exits cleanly on completion: the provider's lease is signed, the scheme is sold to a forward-funding institution, or it is refinanced onto a term investment mortgage against the capitalised lease income. A trading care home exits onto a term commercial mortgage once it is registered and occupancy has built to a level that supports the going-concern value, or by sale to an operator, investor or REIT.

Either way, the lender wants the exit named and evidenced in the appraisal, and the term of the facility, normally 18 to 36 months, must cover the build plus contingency and any lease-up the exit depends on. We arrange the next stage of debt, or confirm the forward-funding or pre-let, in parallel so the development loan never reaches maturity without its successor agreed. Where the exit is a sale to an institution, we evidence the buyer appetite, supported by sector liquidity: forecast healthcare transactions reached around £12bn for 2025 on Knight Frank, UK Healthcare.

Can you fund a conversion or a change of use?

Yes, and conversions are a large share of the UK pipeline. Taking an existing residential, hotel, office or institutional building and converting it to a care home or supported living is often faster and cheaper than ground-up construction, and the same staged facility funds the acquisition where needed, the structural works, the adaptations for care use and the fit-out. Planning for the change of use and meeting CQC and building standards are key gating items, and we can fund the pre-planning hold with a bridge where the timeline demands it.

Pure refurbishment funding is also available for operators who already control a building, financing the works that bring a tired home back to a good CQC rating or reconfigure rooms to modern standards and add lettable capacity. Because that spend converts into beds or units and therefore income, lenders can assess it against the incremental cash flow or lease value it creates. For a trading home, that expansion is often funded more cheaply by refinancing onto a larger term mortgage, and we will tell you when that is the better route.