Buying an aged care facility requires a loan structure that reflects both the property asset and the business that operates within it.
Most lenders treat aged care acquisitions as a hybrid proposition. You are borrowing against commercial real estate, but the serviceability assessment is built around bed licences, occupancy rates, aged care funding instruments (ACFI or AN-ACC), and the operational history of the facility itself. A sole trader looking to acquire their first facility will face different structuring requirements than someone purchasing a second or third site with an established track record.
How Lenders Assess Aged Care Facility Purchases
Lenders evaluate aged care acquisitions based on the operational performance of the facility, not just the property value. Occupancy rates, revenue per bed, and the mix of high-care versus low-care residents determine how much you can borrow. A facility operating at 85% occupancy with a stable ACFI profile will support a higher loan amount than one at 70% occupancy, even if the property valuation is identical.
Consider a sole trader acquiring a 60-bed facility in Western Sydney. The purchase price reflects the land, buildings, and the business goodwill tied to bed licences. The lender will request three years of audited financials, a breakdown of revenue by funding stream, occupancy trends over the past 24 months, and a business plan showing how the transition will be managed without disrupting residents or staff. Serviceability is calculated using net operating income after wages, compliance costs, and maintenance, not the gross revenue figure.
Some lenders will also require a director's guarantee and may ask for additional security if the loan-to-value ratio exceeds 65%. The commercial property loan structure for aged care often includes a split between the property component and the business acquisition component, with different interest rates applied to each.
Why Standard Commercial Property Finance Does Not Fit
Aged care facilities cannot be assessed using the same loan structure as an office building or warehouse. The property has limited alternative use, and the value is inseparable from the operating licence and accreditation status. If the business fails, the property cannot be leased to another tenant without significant conversion costs.
A lender offering standard commercial real estate financing will typically lend up to 70% or 80% of the property value with serviceability based on rental income. For aged care, the loan amount is capped at a lower loan-to-value ratio, usually between 60% and 70%, because the asset is specialist in nature. The valuation itself is more complex, often requiring a business valuer in addition to a property valuer.
In a scenario where a sole trader is purchasing a facility that has been operating at a loss due to management issues, the lender may reduce the loan amount further or require a longer settlement period to demonstrate that occupancy can be stabilised under new ownership. This is where understanding the difference between secured and unsecured components becomes relevant. The property secures the primary loan, but any shortfall in the purchase price may need to be funded through a separate business loan or mezzanine facility, which carries a higher interest rate.
Structuring the Deposit and Working Capital Component
Most aged care acquisitions require a deposit of at least 30% to 40% of the purchase price. That deposit can include cash, equity from other property, or a combination of both. Beyond the deposit, you will need working capital to cover the transition period, which can last three to six months depending on how quickly the facility stabilises under new management.
Working capital requirements are often underestimated. Wages, compliance audits, accreditation renewals, and resident care costs continue regardless of ownership changes. A lender may allow a portion of the loan to be drawn as a revolving line of credit to manage cash flow during the first six months, but this needs to be structured into the initial approval rather than added later.
For example, a sole trader acquiring a facility with strong occupancy but ageing infrastructure may negotiate a loan structure that includes a progressive drawdown for capital improvements. The lender releases funds in stages as work is completed, reducing the immediate debt burden while ensuring the facility remains compliant with aged care standards. This type of structure overlaps with commercial construction loan principles, where drawdowns are tied to milestones rather than released in full at settlement.
Interest Rates and Repayment Flexibility
Aged care facility loans typically carry variable interest rates, with fixed-rate options available for a portion of the loan. A variable rate allows you to make additional repayments without penalty, which is useful if the facility generates surplus cash flow in the early years. A fixed rate provides certainty during the transition period, but limits your ability to reduce the principal ahead of schedule.
Some lenders offer a split structure where 50% to 60% of the loan is fixed for three to five years, and the remainder sits on a variable rate with redraw access. This balances stability with flexibility. If you have access to additional capital or the facility performs above expectations, you can pay down the variable portion without triggering break costs.
Repayment terms for aged care loans are often structured over 15 to 20 years, with interest-only periods available for the first one to three years. An interest-only period can reduce pressure during the transition, but it also means the principal balance remains unchanged. Whether that makes sense depends on your cash flow projections and whether you plan to hold the facility long-term or exit within five to seven years.
Regulatory Compliance and Lender Requirements
Aged care facilities operate under strict regulatory oversight, and lenders will require evidence that the facility holds all necessary licences, accreditations, and approvals. A facility that has recently been sanctioned or placed under additional monitoring by the Aged Care Quality and Safety Commission will face additional scrutiny, and some lenders may decline the application entirely.
You will need to provide a copy of the current accreditation report, any compliance notices issued in the past three years, and documentation showing that the facility meets the Aged Care Act requirements. If you are purchasing a facility that has been flagged for non-compliance, the lender may require that all issues are rectified before settlement or that a portion of the loan is held in escrow until compliance is restored.
This is also where working with a commercial Finance & Mortgage Broker becomes valuable. A broker with aged care experience can identify lenders who understand the sector and are willing to work through compliance issues rather than treating them as automatic deal-breakers. Not all lenders have appetite for aged care, and those that do often have internal specialists who assess these applications separately from standard commercial property deals.
Why Timing and Settlement Terms Matter
Aged care acquisitions rarely settle within the standard 30 to 60-day window used for other commercial property transactions. The due diligence period is longer, and the seller may require an extended handover to ensure continuity of care for residents. A settlement period of 90 to 120 days is common, and some lenders will charge a holding fee if the loan is approved but not drawn within a certain timeframe.
You may also need pre-settlement finance if the deposit is due before your loan is formally approved. This is a short-term bridging facility that is repaid once the main loan settles. Pre-settlement finance carries a higher interest rate, typically between 8% and 12%, and is structured as interest-only with a term of three to six months. It is not a substitute for a full approval, but it allows you to secure the purchase while final documentation is completed.
Call one of our team or book an appointment at a time that works for you. We work with lenders who understand aged care acquisitions and can structure a facility that fits both the property and the business you are buying.
Frequently Asked Questions
How much deposit do I need to buy an aged care facility?
Most lenders require a deposit of at least 30% to 40% of the purchase price for aged care facility acquisitions. This can include cash, equity from other property, or a combination of both, plus additional working capital for the transition period.
Why can I not use a standard commercial property loan for an aged care facility?
Aged care facilities are assessed based on operational performance, occupancy rates, and funding streams, not just property value. The asset has limited alternative use and the value is tied to operating licences, requiring a specialised loan structure.
What do lenders look at when assessing an aged care facility purchase?
Lenders assess occupancy rates, revenue per bed, the mix of high-care versus low-care residents, and the facility's operational history. They also review audited financials, compliance status, and accreditation reports from the Aged Care Quality and Safety Commission.
Can I get interest-only repayments for an aged care facility loan?
Yes, many lenders offer interest-only periods of one to three years for aged care facility loans. This reduces cash flow pressure during the transition period, though the principal balance remains unchanged during that time.
How long does settlement take for an aged care facility purchase?
Settlement typically takes 90 to 120 days due to extended due diligence and the need for a careful handover to ensure continuity of care for residents. Some buyers use pre-settlement finance to secure the purchase while final documentation is completed.
