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Maintaining financial flexibility in the care sector

| Alison Smith | 30 June 2021

Over the last year, the care sector has found itself at the epicentre of one of the biggest crises of a generation and it’s put a struggling sector into even greater difficulty.

At the start of the pandemic in the UK, care homes had to transform in an instant to protect some of the most vulnerable people in society from a virus which has gone on to cause tens of thousands of deaths. But the initial sprint to secure PPE, to adapt to the rapidly changing lockdown rules and government guidance while also caring for the mental and physical wellbeing of people in care and those who look after them has become a marathon.

It would have been hard for any sector to rise to challenges of this scale, but when the virus hit, the UK’s care sector was already facing a financial crisis which meant many care providers had resources stretched to breaking point.

As a result, for care home managers and owners, as well as leading their organisations through this crisis, one of the most important tasks has been to maintain the financial flexibility to react to further unexpected costs.

Financial flexibility means having the means to meet any new costs or outgoings which might arise and being able to invest the money required to seize new opportunities which can’t be foreseen.

Even before the pandemic, this was a tall order for many care providers: Last year, it was forecast that 6,500 care homes were at risk of closure over the next five years as an ageing population puts greater demand on a sector which has struggled with relative decreases in government and local government funding. Meanwhile, resource pressures were growing and providers were struggling to recruit enough carers to meet demand.

Now, COVID-19 has exacerbated every problem the sector was facing, so there is a real difficulty in ensuring that there is any money left to deal with whatever might be round the corner.

Fortunately, there are several options which may help you to build and maintain financial flexibility, even while you’re responding to a pandemic.

First, you may be able to access business asset finance, which is a core lending facility which enables a business to release cash from the value of the assets they already own. Mostly, this is for businesses which are investing in new assets to expand, but business asset finance can be used to refinance unencumbered assets to replenish cash balances and support working capital or other investment.

You can also refinance your existing current assets: In the case of care homes, this will be stock and debtors. Stock will be minimal, consisting of medicines and provisions whereas debtors include local authorities or private individuals who usually pay quite promptly. This can complement core borrowing and overdrafts from a bank, which can help to cover any timing differences, and it can be invaluable because funds can be provided against security in specific assets.

Despite short term financial challenges, if your business is growing, you may consider taking on unsecured loans. However, this carries a risk as it will increase the financial burden you face in future as it is generally more expensive and has a shorter repayment term, so this may not be a suitable option for many care providers. It may be helpful to book an access to finance review which will help you identify the appropriate funding streams available to you; and, at Duncan & Toplis, we can provide these free of charge.

As care sector leaders may need to invest their time in fighting fires, it may help to secure the services of an adviser who can take an objective view of your business; carrying out financial health checks, supporting business planning as well as structuring your debt to reduce repayments and improving your overall cash flow.

Financial health checks can help to identify areas where additional working capital could be released, enabling your cash to go further and ensuring finances are structured appropriately to maintain enough cash to run the business and make a profit.

Finally, business planning will help you to better anticipate future challenges and opportunities while making the most of the resources you have so you can deal with them. Clearly, it may be hard to anticipate what might be next when it comes to coronavirus, but it’s easy to forget that the pandemic isn’t the only thing to contend with and many of these other issues can be predicted in advance.

Making sure that everything which can be foreseen is taken into account will mean you have more time and resources to deal with the unexpected matters which you may encounter, whether it’s more complications with coronavirus or something else entirely.

As always, our team at Duncan & Toplis are ready and available to help businesses across the care sector to overcome their financial and operational challenges. Our team has supported care homes for more than 30 years and our team of experts thoroughly understand the unique challenges you face.

If you’d like the professional support of our team, please get in touch.


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