Buying a medical practice outright or becoming a partner could be the next step in your healthcare career. And once you've done your research into a practice's viability, its location, the patient base, the value of its NHS contracts plus the partnership team you’ll be joining, it's time to start looking for financing options.
Even if you’re a professional considering buying a dental, veterinary or medical practice, funding is an indispensable part of the process. Though we’ll be focusing on healthcare practices in this guide, these tips still apply to a range of practice types.
Financing a new practice is slightly different to financing a partnership. In this article, we'll explore your options, whether you want to strike out on your own or buy into an established practice.
Funding a new practice
As a start-up, VAT and tax demands can put a considerable strain on your finances. A tax loan lets you pay what you owe in manageable monthly amounts and ensures you don't have cash flow difficulties paying off a large tax bill.
Practice loans are a type of unsecured loan available to GPs and can provide high funding levels at favourable interest rates. One of the benefits of a practice loan is that it's not just for startups. You can use the money for a partnership buy-in, for cashflow support or any time you need a capital injection into your practice.
Working capital finance
This type of finance is also known as net working capital and is used for your practice's day to day running costs. This financing option boosts your available working capital.
Financing medical equipment
Purchasing the equipment you need for a new practice is one of the biggest drains on your expenses. You might decide onasset leasing or spread the cost using hire purchase in the short term. Whether you purchase new equipment or good quality second-hand, specialist asset financing options can help fund the equipment you need, from IT hardware to equipping your practice room.
Refinancing current debt
When existing loans mature, it is worthwhile reviewing the options in the market. This is particularly true of those loans taken out in the nineties and noughties when high interest rates and punitive exit penalties were widespread.
Becoming a partner
You may be looking at a partnership rather than your own practice, for instance, if you’re a GP at an established practice. Most lenders are keen to finance a new partner buy-in either because an existing partner is leaving or retiring or because the current partners are keen to offer you a partnership.
The size of your buy-in loan will depend on the percentage of the freehold on offer. The other partners will determine this figure, generally calculated as an equal share. So, for example, if you're invited to purchase a 25% share in a £1 million practice, you'll need a £250,000 buy-in loan.
Some lenders will be comfortable offering an unsecured loan for the total amount. However, you could choose to secure the loan in return for a better interest rate.
New to a Partnership payment scheme
This NHS backed scheme aims to move health professionals into practice partnerships. Successful applicants receive a training fund to develop new partnership skills and an additional lump sum payment to support their establishment as a new partner.
Applying for funding
When applying for funding, you'll be required to provide the following information:
- Three months of personal bank statements
- Three years of practice accounts if applying for a buy-in loan
- A personal profile detailing your monthly incomings and outgoings and any assets
- Projected salary and notional share of the rent from the practice
- Proof of the percentage you're purchasing for a buy-in loan
- Confirmation of the amount you want to borrow
Medical practice loans from Funding Round
At Funding Round, we're a business finance broker specialising in finance for health professionals. With access to major banks and specialist lenders, we can find the right loan for you, whether you're buying in as a partner or setting up your own practice. Contact us now to discuss your financing options.