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Mortgage Advisor & Director
Can I get a mortgage for a childcare or nursery business?
Yes, there are several financing options for childcare and nursery businesses, with a mortgage being the most common.
Demand is high for childcare, as it is a necessity for many working parents. Lenders will be concerned with the financial performance as well as the experience and capability of the leadership team.
Your best chance of mortgage approval is by using an experienced broker who specialises in commercial mortgages for childcare businesses. At Teito, our team of expert advisors have helped many people like you to find the perfect mortgage for their childcare business.
As a whole of market broker, we have access to hundreds of lenders, including those who specialise in childcare mortgages. Get started today by completing our simple online form, and we promise to make your mortgage journey as straightforward and stress-free as possible.
Who is eligible for a childcare business mortgage?
Prospective lenders will want to see that you have relevant industry experience and a track record of running a successful childcare business.
If you're looking to buy an existing childcare business, the lender will be looking for a minimum of two to three years of financial accounts. If you're starting from scratch, there is likely to be additional checks needed, for example, on your experience and qualifications.
Whether you're establishing a new setting or proposing to buy an existing one, your application will also need to be supported by a robust business plan. Assuming there is sufficient detail included, this will indicate to lenders that you are capable of making the business profitable.
Lenders will also evaluate your CQC and DBS reports.
Your application will be assessed on a case by case basis, taking into account the following:
- The loan to value (LTV) ratio of the loan
- Your credit rating
- Your experience in the industry
- The affordability assessment of the loan
- Financial performance
- The location of the childcare business
How much can I borrow for a childcare mortgage?
There is not one overriding calculation for working out how much you can borrow with a childcare mortgage as each lender will have their own rules. However, they will all judge the affordability of the loan based on previous trading and projections. Some may permit you to declare additional income to improve the affordability assessment.
Can I get a childcare mortgage with bad credit?
It is undoubtedly more challenging to get a childcare mortgage with bad credit; however, it is not impossible.
Not all bad credit is judged equally, and prospective lenders will consider the age and severity of the credit issue when making their evaluation. Each application is assessed on a case by case basis, and even if you have been turned away by one lender, it doesn't necessarily mean you will be rejected again.
If you have a bad credit history, it can be especially beneficial to use a mortgage broker as they will be able to improve your application and recommend lenders who are more amenable to credit issues. Read our guide to bad credit mortgages.
Alternative finance options for childcare settings
There are several alternative finance options for childcare settings and nurseries.
Bridging loans
Bridging loans are a type of flexible, short term finance that can be arranged very quickly.
If you're buying a property at auction, for example, bridging loans can be beneficial to ensure you have the funds within the short timeframe required.
Unlike with a mortgage, you can also get a bridging loan to buy an uninhabitable property, which could be a childcare setting that needs refurbishment to bring it up to standard.
As you may expect with a short term finance option, the rates tend to be higher, and you will need a clear exit strategy for when the term finishes; which may be a standard mortgage. Read more about bridging loans.
Development Finance
If you're looking to finance a childcare property development project, either a build or refurbishment, development finance could be a viable option to consider.
With development finance, the funding is released in phases to align with the project, and you will only pay interest on the amount deposited so far. As with bridging finance, development finance is a short term option, and you will need to consider the future financing of the project once it is complete; which is likely to be a mortgage. Read more about development finance.
How can I learn more?
As a whole of market broker, our team have access to more than 20,000 mortgage deals, including those offered by lenders specialising in childcare business finance. Get started today, and we promise to make your mortgage journey as stress-free and straightforward as possible.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
