Supported living bridging finance
Short-term funding to buy, convert and let supported housing, structured around the works programme and the wait for a provider to sign.
Bridging a purchase, a conversion and the lease-up
Bridging finance in supported housing does one of three jobs: it buys a property quickly, often at auction or where a seller needs certainty; it funds a conversion to the standard a provider requires; or it carries a completed property through the gap between practical completion and a signed lease. Most conversion deals need all three from a single facility.
That third job is the one that defines this product in our sector and the one investors most often under-plan. A refurbished ordinary house can be let to almost anybody within weeks. A converted supported living property produces its enhanced rent only when a specific provider signs a specific lease, and that can take months longer than the works did. A facility sized to the build programme alone runs out at exactly the wrong moment. We structure the term to cover works plus a realistic lease-up period, and we arrange the term debt that takes out the bridge. We are an arranger and introducer, not a lender.
Key features
- Purchase funding at speed, including auction and distressed acquisitions
- Staged works drawdowns against a monitoring surveyor's schedule
- Term structured to cover the lease-up gap, not just the build programme
- Exit arranged in parallel, onto term debt or a sale to an investor
Indicative terms
- Loan size (indicative)£100k to £10m
- Loan to value (indicative)Up to around 70 to 75% of purchase, plus works
- Rates (indicative)From around 0.75% per month
- Term (indicative)6 to 24 months
- ExitTerm debt on a signed lease, or a sale
Indicative only. Terms vary by lender, scheme and borrower and are not an offer of finance.
Who it suits
- Investors buying and converting residential stock to supported living standard
- Buyers needing speed at auction or on a distressed purchase
- Landlords carrying a completed property through the wait for a provider
- Owners refinancing an existing bridge that is running out of term
Useful calculators
Related guides
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A view on fundability within one working day.
Why the lease-up gap decides the facility term
A bridging lender's chief question on a supported living conversion is not whether the works can be done. It is what happens between practical completion and a signed lease. If works finish in month four and a provider signs in month eleven, the facility must survive seven months with no income and the borrower must service it from other resources.
Deals presented with a named provider and heads of terms get funded on materially better rates than deals presented on the assumption that a provider will appear. If you have provider interest, evidence it. If you do not, be honest about it in the appraisal and size the facility accordingly, because a twelve-month facility costs far less than a nine-month facility that needs extending.
Buying supported housing stock at auction
Auction purchases in this sector usually involve properties needing work, sometimes former HMOs or stock a previous provider has vacated. The 28-day completion window means finance has to be arranged before the hammer falls, not after, and a lender that has already seen the legal pack and issued terms is worth more than a marginally cheaper one that has not.
One warning specific to this market: lots let to a supported housing provider are sometimes marketed at a yield implying a strong covenant, when the provider is in difficulty and that is precisely why the lot is being sold. Read the lease and the provider's position before bidding, not after. A lender will, and if it does not like what it finds you will be holding a completion you cannot fund.
How works funding is drawn and monitored
Works are almost never advanced in a lump. The lender releases funds in stages against certificates from a monitoring surveyor who inspects progress, typically monthly, confirming that value has been added before the next tranche is released. That protects the lender and it also disciplines the programme.
The practical consequence is a cash flow gap: you pay for work, then claim it back. Contractors expect payment on their own terms and a drawdown cycle can run three to four weeks. Investors who have not modelled that working capital requirement stall mid-programme, and a stalled site is the most expensive thing on a bridging facility.
Arranging the exit before you draw the bridge
A bridge is only as good as its exit and the exit on a supported living conversion is a term lender's valuation. As covered on our commercial mortgages page, that lender may value on vacant possession rather than by capitalising the lease rent, which can leave the term facility well short of the bridge that needs repaying.
We therefore establish the likely term valuation basis before the bridge is drawn, not after the works are done. Where the numbers do not work, it is better to know at the outset and either restructure the deal, increase the equity or walk away. An investor who discovers the gap at refinance stage has very few options and all of them are expensive.
Worked example: bridging an auction purchase and conversion
An investor buys a six-bedroom former HMO at auction for £195,000 with the intention of converting it to supported living standard at a cost of £60,000, then letting it to a provider at £24,000 a year on a 20-year lease. These figures are illustrative only and not an offer of finance.
Terms are agreed before the auction. The lender advances 75 percent of the purchase price, £146,250, on completion within the 28-day window, plus the £60,000 of works in three staged drawdowns against surveyor certificates. Total facility £206,250 against a project cost of £255,000, so the investor contributes £48,750 plus fees.
At an indicative 0.85 percent a month, interest runs at roughly £1,750 a month once fully drawn. Works take six months and the provider signs four months after that. Over the ten-month period the investor carries around £15,000 of interest, funded from other resources because the property earns nothing until the lease starts. The facility was taken for eighteen months rather than twelve precisely to avoid an extension at month ten.
On refinance the term lender values the completed, let property. If it works from investment value it may support £320,000 and lend £208,000 at 65 percent, clearing the bridge. If it uses vacant possession and values the converted HMO at £240,000, the term loan is around £156,000 and the investor must find roughly £50,000 to complete the exit. Knowing which of those two outcomes applies before bidding is the whole discipline of this product.
Illustrative worked example only. Figures vary by lender, asset and borrower and are not an offer of finance.
Supported living bridging finance: common questions
Who qualifies for a bridging loan on supported housing?
Bridging is generally available to corporate and experienced-investor borrowers as unregulated business lending, secured on the property with a clear exit. Lenders look at the asset, the works programme, the exit and your track record more than at income. Personal guarantees are common.
How long should a supported living bridging facility run?
Longer than the build programme. The period that catches investors out is between practical completion and a provider signing the lease, which can run several months. An eighteen-month facility usually costs far less than a twelve-month facility that needs extending, and lenders take a better view of a realistic timeline.
What are the downsides of a bridging loan?
It is expensive relative to term debt, interest accrues whether or not the property is earning, and the exit is your responsibility. On supported living the specific risk is that the exit depends on a third party signing a lease and on a term lender's valuation basis, neither of which you control. Both should be assessed before drawing.
Can I get bridging finance for an auction purchase?
Yes, and terms should be agreed before the auction rather than after. A lender that has already reviewed the legal pack and issued terms is worth more than a cheaper one that has not, because the 28-day completion window leaves no room to start from scratch.
How are conversion works funded on a bridge?
In staged drawdowns against certificates from a monitoring surveyor who inspects progress, usually monthly. You pay for work then claim it back, and the drawdown cycle can run three to four weeks, so working capital is needed to keep contractors paid. Not modelling that is a common cause of stalled sites.
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