Edinburgh · Scotland · UK-wide
A nursery is funded as a trading business in regulated premises rather than as a property, so lending sits at 60% to 75% of value over terms up to 25 years — lower than a dental practice, because the security is the building and the operation rather than a transferable patient list. The three things that decide the outcome are your regulator's rating, occupancy, and the balance between government-funded hours and full fee-paying places. Prime Mortgages arranges nursery purchases, second settings, group acquisitions and refinancing across the whole of the UK.
Nursery lending is a specialist commercial product. A general business banking desk will often quote you a shorter term and a lower loan to value than a lender with a healthcare and education book, on exactly the same setting.
| Deal type | Typical LTV | Typical term | Notes |
|---|---|---|---|
| Freehold nursery purchase | 60%–75% | Up to 25 years | The mainstream case; strong ratings and occupancy push toward 75% |
| Owner-occupied, you already trade there | Up to 75% | Up to 25 years | Your existing rent record is the strongest evidence of affordability |
| Leasehold nursery (goodwill) | 50%–65% | 5–15 years | Needs a long unexpired lease; term is capped by the lease |
| Second or third setting | 60%–75% | Up to 25 years | Underwritten on the group, not just the new site |
| Group or chain acquisition | 55%–70% | Up to 20 years | Often structured as a single facility over multiple settings |
| Refinance to release equity | 60%–75% | Up to 25 years | Priced against your current EBITDA, not the price you paid |
A £900,000 freehold nursery at 70% needs £270,000 of deposit and costs. Where the setting is strong and you have sector experience, 75% is achievable, which takes that to £225,000.
A freehold nursery is a property-secured loan and behaves like any commercial mortgage: long term, better rate, higher loan to value.
A leasehold nursery is essentially goodwill lending. The lender's security is a business occupying someone else's building, so the loan to value falls, the term is capped by the unexpired lease, and the lender panel narrows considerably. As a rough rule you want at least fifteen years unexpired, and lenders will look hard at rent review provisions.
If you are choosing between two settings and one is freehold, the funding difference is usually larger than the price difference.
Nursery sales are competitive and vendors' agents ask about funding early. Knowing what you can borrow before you offer is free, and it regularly beats a higher offer that has no finance behind it.
Lenders rebuild the accounts: the outgoing owner's drawings added back, one-off costs stripped out, and a market-rate manager's salary deducted if the owner was working in the setting. That adjusted figure is what the loan is sized against, and it is often well below the headline profit in the sales particulars.
Most lenders want adjusted profit to exceed the loan payments by 30% to 50%. On a marginal setting this, not the loan to value, is what caps the loan.
Registration does not transfer automatically with the business — Ofsted in England, the Care Inspectorate in Scotland, CIW in Wales. Completion is usually conditional on the new registration being in place, and this is the most common cause of a delayed completion. Start it early.
Staff TUPE obligations, the funded-hours agreement with the local authority, any outstanding regulatory actions, and the condition of the building and outdoor space.
Most nursery owners are on borrowing arranged when they bought and never revisited. If occupancy and fees have grown since, the loan can be resized against your current EBITDA rather than the one you bought on.
No fee for the initial conversation, and no obligation. We usually reply the same working day.
Common questions
Yes. A freehold day nursery is typically funded at 60% to 75% loan to value over terms up to 25 years, with the better end available where the setting has a strong regulator rating, occupancy above 80% and you have sector experience. A leasehold nursery is goodwill lending and sits lower, usually 50% to 65%, over a term capped by the unexpired lease.
Usually 25% to 30% of the purchase price for a freehold, plus stamp duty or LBTT, legal fees and working capital. On a £900,000 setting that is around £270,000 all in at 70%. Existing owners buying a second site can sometimes use equity in the first as additional security rather than finding fresh cash.
Substantially — it is the first thing an underwriter looks at. Most lenders want Ofsted Good or Outstanding, or Care Inspectorate grade 4 and above in Scotland. A Requires Improvement or a grade 3 typically reduces the available loan to value sharply and raises the rate; some lenders decline outright until the next inspection improves it.
Yes, though it is harder. The lender is funding goodwill rather than property, so expect 50% to 65% loan to value and a term capped by the unexpired lease — you generally want at least fifteen years remaining. Rent review provisions and any landlord restrictions are examined closely.
Lenders generally look for 80% or above, but the trend matters as much as the number. A setting at 72% with occupancy rising over three years and a waiting list reads better than one at 82% and falling. Seasonality is expected and understood.
Yes, and it is usually the cheapest way to fund expansion, because you are borrowing against a proven trading business rather than a speculative one. The second site is underwritten on the strength of the group rather than on its own, which is why the second setting is frequently easier to fund than the first was.
No. Commercial mortgages and loans taken by way of business fall outside FCA regulation, so there is no recourse to the Financial Ombudsman Service and Financial Services Compensation Scheme protection does not apply.
Typically 3 to 6 months. The finance itself often runs 8 to 12 weeks, but transferring the registration to the new provider — Ofsted, the Care Inspectorate or CIW — is the usual bottleneck and should be started as early as the offer is accepted.
A twenty-minute conversation will tell you what you can realistically borrow, what it will cost and whether it is worth doing. It is free, and we will tell you honestly if the answer is no.
About these figures. Loan to values, terms and cover ratios on this page describe what lenders in this sector were offering as at August 2026. They are market ranges, not an offer or a quotation, and they are not based on cases we have placed. What any individual lender will do depends on the business, the property, the covenant and your circumstances. Criteria change frequently — ask us for the current position before you rely on any figure here.