Supported living finance for care and support providers

Income is almost entirely commissioned. A local authority, and for some people with the highest needs an NHS integrated care board through Continuing Healthcare, agrees a package of support hours for each person: core shared hours across a service, individual one-to-one hours, and sleep-in or waking night cover. The provider invoices for hours delivered, commonly four-weekly or monthly in arrears, and some councils pay against their own electronic records rather than the provider's invoice. A smaller share of income may come through direct payments managed by the person or their family.

Almost all cost is staff. Support workers are paid weekly or monthly from the day a service opens, rises in the National Living Wage arrive each April, and fee uplifts from commissioners do not always match them or arrive on time. Night cover, training in positive behaviour support and medication, and agency staff to fill gaps all add to the payroll before any income is received.

Where providers deliver personal care, they must be registered with the CQC for that regulated activity; the CQC's guidance on supported living services explains how this differs from registering a care home.

Providers setting up a visiting home care service rather than supported living can read our guide on starting a domiciliary care agency, which covers CQC registration and start-up costs.

• Mobilising a new service: recruiting and training a team, often for several people moving in at once, weeks before the first invoice is paid.
• Winning a framework or block contract that multiplies the hours delivered, and therefore the payroll, faster than the cash comes in.
• Payment delays when a council changes systems, disputes hours, or waits for a package review to be signed off.
• Wage rises landing before commissioners confirm their annual fee uplift.
• Vehicles, including wheelchair-accessible vehicles, so people can get to work, college and community activities.
• Systems: digital care records, rostering and call monitoring that commissioners increasingly expect.
• Buying another provider to gain contracts and staff in a neighbouring area.

Borrowing to keep a contract running at a rate that does not cover wages only increases the losses. Before taking finance for a service that is underpriced, look at whether the fee can be renegotiated or the contract handed back. Read the exit terms of any invoice finance agreement before signing, as leaving early can be costly, and expect a lender to ask directors for guarantees on unsecured borrowing.

Housing is a separate risk. Supported housing is coming under closer oversight following the government's response on supported housing regulation, and a provider whose services depend on one landlord can be affected by that landlord's difficulties. Lenders will ask about this, so it is worth understanding before you apply.