Purchasing an aged care facility requires a different approach to commercial property finance than most other property types. Lenders assess these transactions based on occupancy rates, regulatory compliance, and operator experience, not just property value and rental yield.
The primary challenge for self-employed buyers is demonstrating stable cash flow and operational capacity to manage a regulated health service. Lenders want to see at least two years of financial statements showing consistent income, plus evidence that you understand the aged care sector's regulatory framework. If you're stepping into aged care ownership for the first time, expect scrutiny around your management structure and whether you'll operate the facility yourself or lease it to an approved provider.
What Lenders Assess Before Approving Aged Care Facility Finance
Lenders look at occupancy history, bed licence status, and the facility's accreditation record. A facility operating at 85% occupancy with a clean compliance history will attract better loan terms than one with vacancies or recent regulatory issues. The property valuation considers both the bricks-and-mortar asset and the embedded business value, which means you'll need a specialised commercial property valuation from a valuer with aged care experience.
Your financial position matters, but so does the facility's performance. If the current operator has maintained stable occupancy and met all accreditation standards, lenders view that as transferable value. If occupancy has declined or there are deferred maintenance issues, you'll need a clear plan to address those before settlement, and that plan will influence your loan amount and structure.
Loan Structure Options for Self-Employed Buyers
Most aged care facility purchases use a commercial property loan with a loan-to-value ratio between 60% and 70%. The lower LVR reflects the specialised nature of the asset and the operational risk involved. If you're buying a facility in Sydney's outer suburbs where demand is growing, some lenders may stretch to 70%, but you'll still need a deposit of at least 30% plus settlement costs.
Consider a buyer purchasing a 40-bed facility. The buyer has operated medical clinics for the past decade and wants to expand into aged care. The facility is fully occupied, generates monthly income from a mix of high-care and low-care residents, and has no compliance issues. The lender structures the loan with a 65% LVR, a variable interest rate, and a 20-year term. The buyer provides a 35% deposit from the sale of an investment property, and the loan includes flexible repayment options that allow additional payments without penalty. The loan settles within 45 days, and the buyer transitions management over a three-month handover period.
That structure works because the buyer demonstrated relevant experience, the facility had strong fundamentals, and the deposit size reduced the lender's risk. If any of those factors were weaker, the loan structure would have changed.
Fixed or Variable Interest Rate for Aged Care Facility Loans
A variable interest rate gives you flexibility to make extra repayments and access redraw if the facility needs capital for upgrades or unexpected costs. Aged care facilities often require ongoing investment in equipment, compliance upgrades, or refurbishment to maintain occupancy. A variable rate loan lets you pay down debt faster when cash flow is strong and redraw funds when needed.
A fixed interest rate locks in your repayments for a set period, which helps with budgeting if you're managing tight margins in the first few years. Some buyers split their loan between fixed and variable, fixing a portion to protect against rate rises while keeping the rest variable for flexibility. The right choice depends on your cash flow confidence and how much working capital you hold outside the loan.
How Regulatory Compliance Affects Your Loan Approval
Aged care facilities operate under strict regulation, and lenders check whether the facility meets current standards before approving finance. If the facility has an upcoming accreditation review or requires fire safety upgrades, the lender may hold back funds until those issues are resolved or require you to complete the work within a set timeframe after settlement.
You'll need to show that you understand your obligations under the Aged Care Act and that you have systems in place to meet reporting and care standards. If you're engaging a facility manager or partnering with an experienced operator, include that detail in your loan application. Lenders view operational expertise as a form of collateral because it reduces the risk of compliance breaches that could affect the facility's licence and, by extension, its income.
Deposit and Settlement Costs You'll Need to Cover
You'll need at least 30% of the purchase price as a deposit, plus settlement costs including legal fees, valuation fees, and due diligence expenses. If the facility requires immediate capital expenditure to maintain compliance or occupancy, factor that into your upfront costs. Some buyers arrange pre-settlement finance to cover due diligence and initial works, then roll those costs into the main loan at settlement.
If you're selling another property to fund the deposit, timing becomes critical. A commercial bridging finance arrangement can cover the gap between contracts if your sale hasn't settled before the aged care facility purchase completes. That avoids the risk of losing the facility due to delayed settlement and gives you time to arrange your commercial property loan without pressure.
Why Lender Choice Matters for Aged Care Facility Finance
Not all lenders understand aged care facilities or have appetite for the sector. Some treat these purchases as standard commercial property transactions and miss the operational complexity. Others specialise in health and aged care lending and structure loans around occupancy cycles, refurbishment schedules, and regulatory capital requirements.
Working with a broker who can access commercial loan options from banks and lenders across Australia means you're not limited to one lender's policy or pricing. Different lenders assess aged care facilities differently, and some will offer better terms based on location, bed numbers, or the buyer's operational background. A broker familiar with commercial property finance can position your application to highlight the strengths lenders care about and structure the loan to match your cash flow and growth plans.
If you're expanding an existing aged care business, some lenders offer revolving line of credit facilities secured against multiple properties. That structure gives you ongoing access to capital for acquisitions, refurbishments, or working capital without reapplying for finance each time. If you're buying your first facility, a standard commercial property loan with flexible loan terms is usually the starting point.
What Happens If Occupancy Drops After Settlement
Occupancy affects your ability to service the loan, and lenders know that. Most loan agreements include covenants requiring you to maintain a minimum occupancy level, typically around 80%. If occupancy falls below that threshold, you may need to provide additional financial information or inject capital to cover the shortfall.
Planning for occupancy risk means holding working capital outside the loan and having a marketing and referral strategy in place before you settle. If you're buying a facility with declining occupancy, negotiate a lower purchase price or structure the deal with a performance-based component that adjusts the final price based on occupancy at settlement. Lenders view that approach positively because it aligns the purchase price with the facility's actual performance.
Call one of our team or book an appointment at a time that works for you. We'll review your financial position, assess the facility you're looking at, and structure a commercial finance package that matches your needs and gives you the flexibility to manage the facility effectively.
Frequently Asked Questions
What deposit do I need to purchase an aged care facility?
You'll typically need a deposit of at least 30% of the purchase price, as lenders usually offer a loan-to-value ratio between 60% and 70% for aged care facilities. You'll also need to cover settlement costs including legal fees, valuation fees, and due diligence expenses.
How do lenders assess aged care facility loan applications?
Lenders assess occupancy rates, bed licence status, accreditation records, and the buyer's operational experience. They also review the facility's compliance history and your financial position, looking for at least two years of consistent income and evidence you understand aged care regulations.
Should I choose a fixed or variable interest rate for an aged care facility loan?
A variable rate offers flexibility for extra repayments and redraw access for ongoing facility upgrades. A fixed rate provides repayment certainty for budgeting. Many buyers split their loan between fixed and variable to balance stability with flexibility.
What happens if occupancy drops after I purchase the facility?
Most loan agreements include covenants requiring a minimum occupancy level, typically around 80%. If occupancy falls below that, you may need to provide additional financial information or inject capital to cover the shortfall. Holding working capital and having a referral strategy in place helps manage this risk.
Can I use bridging finance to cover the deposit on an aged care facility?
Yes, commercial bridging finance can cover the gap if you're selling another property to fund the deposit and settlement timing doesn't align. This arrangement prevents losing the facility purchase due to delayed settlement and gives you time to arrange your main commercial property loan.
