Over half (55%) of doctor’s surgeries in the United Kingdom are owned by General Practitioners. And, with the ever-increasing population, activity in the healthcare sector has continued to grow, so surgeries are being seen as sound investments for retirement more frequently.
In past years, lenders would offer doctors ‘buy-in’ packages that would allow them to buy into their practice surgery premises whilst working there. However, since the 2007-08 Financial Crash, many lenders stopped this offering as their appetite to lend to doctors without the benefit of the surgery’s bank account dwindled.
If you're looking to buy an property to start a practice it is fairly simple, with lenders lending up to 100% of the value.
However, if you are thinking about purchasing a surgery, there are a number of things that you need to consider before you dive in to what can be a complicated process.
So, what are my options?
Your first and most obvious option is to get a commercial mortgage. This can help you buy a surgery or practice and works very much like a residential mortgage. The key difference is that every commercial mortgage is treated on an individual basis, so the terms and rates that you end up with will be dependent upon your circumstances, proposal and application.
What’s the mortgage process?
Like any other mortgage, lenders will want to look at your accounts to ensure that the practice or surgery is suitable for their borrowing, and your Care Quality Commission report will also be looked at. Regardless of the type of surgery that you’re looking at, if you're purchasing an existing practice you will always need to provide the latest three years’ annual trading accounts so that lenders can then assess your affordability based on your financials.
If the practice is new, then you will need a strong business plan to support any application.
What if I already own a practice and want to buy another one?
Well, you can’t simply take money out of your existing practice to buy another one. This would more than likely reduce your working capital and possibly cause problems with your cash flow and put your existing practice or surgery into financial trouble.
However, if you have an amount of ‘wealth’, or goodwill, built up in your current practice, you could use this without touching the funds in your business’s bank account. Known as a Goodwill Loan, or a Capital Withdrawal Loan or Cash Out, this lets you gain access to the value of your business’s wealth without withdrawing the funds.
The goodwill that you have built up over time in your practice will act as the security to the lender for the loan and it can bring you a sum that is approximate to your annual turnover, with repayment terms usually up to around 15 years.
As with any mortgage application, the lender will have to look at your current accounts before making a decision, and interest rates will be decided upon when the loan is taken out.
Another option you can consider is to take out a secured business loan, which are loans that are supported by securities like your home or any other business properties or assets that you may own. This will reduce the risk to the lender and reduce the cost of the loan to you as a result.
What if I want to borrow a smaller amount?
Depending on the amount that you want to borrow, you could look at taking out an unsecured business loan. These loans tend to be under the £250,000 mark, though often much less, and are often repaid in monthly instalments over a five-year term.
This sort of loan is perfect if you need to move fast, as they can often be decided upon within one working day with some lenders – though you will need to provide a Personal Guarantee that means you will become personally liable for the debt.
Could I mix and match the options?
It is known as ‘jigsaw finance’, and yes, you can if one single solution doesn’t fit your plans. Jigsaw finance is made up of various business finance arrangements all rolled up into one. For example, you may use a Goodwill Loan for your deposit, whilst taking a commercial mortgage for the long-term goal and an unsecured loan for the short-term costs.
What about financing everything involved in the purchase?
Because you will be classed as a medical professional with your own practice, you may be able to seek 100% finance for your plans. Contact one of our doctor’s surgery or practice mortgage experts below to get your application underway or if you have any further questions.