How to Fund a GP Practice
With the current high demand for GP services in the UK, you may be one of many fully-registered medical practitioners thinking of setting up a private practice, or growing your existing practice group.
In this guide, we will cover the process of establishing a new medical practice, and the types of finance available to fund your venture.
Table of Contents
How to start a new GP practice
Any licensed medical practitioner registered with the General Medical Council can open a private GP practice. Having your own practice is an attractive prospect for many reasons, not only that you are free from the constraints of providing NHS services and the pressures of meeting targets, but that you can offer a significantly higher level of service to your patients and, of course, reap the personal, professional and financial benefits.
You will be setting up and running your practice as a business, so there are some things to consider to help ensure that it is successful.
Choosing your GP practice location
First of all, you will need to find suitable premises for your GP surgery. As with any business, choosing the right location is vital. Some private GPs decide to operate from a consulting room in a private or NHS hospital, or even from their home, whereas others opt for purchasing or leasing a property or an existing GP surgery.
Private GP practices are commonly situated within areas that have an affluent demographic, where there is a market for paid-for primary healthcare services. You will need to be aware of any local competitors, including NHS practices; if there is a dense population, and/or there are new build home developments in your preferred location, it is likely that existing GP services will be under pressure, and additional private services will be welcomed.
For your patients, convenience and accessibility are essential. The building itself will need to be accessible throughout, and have adequate parking, close to the entrance of the property and ideally free of charge for your patients to use. For patients who do not use cars, consider how easy your surgery will be to access without a vehicle, including on local public transport.
If you decide to buy a freehold property for your GP practice, you may require a commercial mortgage which allows you to spread the repayments over up to 20 years. If you are choosing a property to lease on a long-term basis instead, a commercial loan can be used to provide you with the funding to purchase a long-term lease.
You may wish to set up your GP practice as a sole trader, which offers many benefits in itself, including having total control over your business and where, when, and how you work. However, you will be liable for all aspects of running your practice, including bookkeeping, maintaining your property, and employing, training and managing staff. The process of financing your medical practice will also be your responsibility.
Alternatively, running your practice as a partnership with one or more other medical practitioners may be better suited to you. It will enable you to share not only the running of the business but also the care of your patients should one of you be absent or unavailable for any reason. You will also jointly share the financial responsibility of your practice, including purchasing the freehold or lease on the property; needless to say that being in a partnership gives you greater buying power and when seeking finance, can make you a more attractive prospect to lenders.
You may already have someone in mind as a partner for your GP practice, be they a previous colleague or an experienced partner at another practice who is seeking a new challenge. Or you may wish to advertise for suitable candidates via a specialist GP website or publication, on social media, or via your local recruitment school or Royal College of General Practitioners faculty.
If you are setting up a new GP practice, you will need to source a vast amount of equipment, which can be a costly process. However, it is not necessary to always buy brand new equipment; considering second-hand can enable you to acquire good quality equipment at a fraction of the price. Among many other things, IT equipment, medical machinery such as sterilisers, and furniture are all items that you may be able to buy used, so take time to shop around before purchasing, as you could make your budget stretch further.
But asset finance could be the ideal solution if you need some extra help with funding everything you need for your GP surgery, particularly with acquiring larger pieces of medical equipment or even vehicles. Asset financing allows you to spread the cost of purchasing essential equipment for starting up your practice, including second-hand items, giving you greater upfront buying power, which may, in turn, enable you to secure better deals.
From hire purchase to contract hire, there are many different types of asset finance, and speaking to a specialist broker such as Rangewell will help you to understand your options. The experts at Rangewell will speak to a wide range of providers, and search across the entire market to source the medical equipment finance plans that are best suited to your business, at the most competitive rates.
Growing your GP practice
Once your GP practice is established, you have a loyal and steadily-growing list of patients and you are feeling confident that your business venture is a success, it may be time to consider your next steps.
If it has become a challenge to keep up with patient demand, could you expand your practice by appointing a new partner? Would your business benefit from larger premises, or adding another practice to your group? Below we explain three ways that you could grow your business, and the financial implications of each decision.
Appointing new partners
You might make the decision to appoint an additional partner (or partners) in order to expand the patient capacity of your GP practice, or perhaps to bring in a new specialism to your business. There may also come a time when an existing partner wishes to leave, whether through resignation or retirement, and will need to be replaced.
Whatever your reasons, there are some considerations to make from a financial perspective before you begin the recruitment process:
- Whether an existing partner will need to be bought out by the incoming partner;
- Whether the incoming partner will need to buy in to the practice, and if so, will they be self-funding or using a loan;
- The parity (profit share) that the incoming partner will have in the partnership upon joining;
- Whether or not you own the property in which your GP practice is located, and the financial implications of this for the incoming partner;
- The financial impact of bringing in a new partner upon the existing partners.
Our guide to buying into a GP practice explains everything you need to know, including the financial implications of recruiting a GP partner.
Growing your premises
Particularly if you are taking on more staff or bringing in another partner, your GP surgery may no longer provide adequate space for your expanding business. Should your existing premises be suitable for further development, you may wish to extend your property or remodel the inside to provide the additional room that you require.
Practice loans are designed to provide finance to professionals, including GPs for any business purpose, such as improving the premises that you currently own. This type of finance recognises your professional status and offers a funding solution with preferential interest rates, and repayment terms from 6-60 months. Talk to a business finance expert at Rangewell to find the right practice loan for growing your property.
Buying another practice
Acquiring additional premises can enable your GP practice business to grow exponentially and fulfil your potential to offer additional services, expand into a different location, and take on a greater number of patients to meet the ever-increasing demand.
Buying another practice is, of course, a significant financial commitment, and there are several funding options that you can explore. These include commercial loans or bridging loans for buying or leasing a property, or a commercial mortgage for a property purchase, but you may also look at growth capital finance for large-scale funding or goodwill loans, which are secured on the value of your business and are commonly used by medical professionals to fund further property purchases.
The expert team at Rangewell can discuss all of your options with you to find the right type of finance for buying another GP practice.
Leasehold or freehold: What’s the difference?
There are two ways that you can acquire a premises for your GP practice: buying a freehold property outright or taking out a lease on a property for a stipulated amount of time.
Owning a freehold property can be a good long-term investment as without any rent or service charges to pay to a landlord, all of your profits stay within your business. You also have an asset with long-term security for your business, with full autonomy over the building itself and any changes you may wish to make. If there are multiple partners in your GP practice business, you will each own an equal percentage of the property.
A freehold property is not without its potential disadvantages; an important consideration is that you can lose money if your property has decreased in value when you sell. Purchasing a property also ties up capital and debt capacity for your business, which may restrict your future growth plans.
On the other hand, buying a leasehold property for your GP practice means that you own the building and the land it is built on, but only for a set amount of time. A major benefit of taking out a lease is that you will be investing money into your business rather than a large asset, and this could enable you to more easily access funding for other aspects of your GP practice, including future growth.
While the terms do vary, leases offer a degree of flexibility and you will be able to move at the end of the lease if you wish to, but there is also the risk that your contract will not be renewed and you will be forced to vacate the property. You will also not be able to make any significant changes to the property during your occupation, so if you find that you are outgrowing the premises or they are no longer suitable, you will need to be able to break your contract so you can move on.
Types of finance for funding a GP practice
In this section, we will summarise the types of finance that may be available to you for funding a GP practice, whether it is your first property, you are making improvements to your existing premises, or expanding your business.
A commercial loan is a general type of business finance that you can use to purchase or lease a property or acquire an existing GP practice. These types of loans are most suitable for addressing short-term capital needs, such as when you need to make a purchase or investment that may be time sensitive.
The terms of commercial loans are flexible to suit your business and offer competitive rates. However, typically lenders offer unsecured loans of up to £25,000, so if you require a larger scale of funding, such as for a freehold property purchase, you may need to look at a commercial mortgage.
A commercial mortgage will take over where a commercial loan finishes. Much like a residential mortgage, a commercial mortgage is a loan secured on a property, which you will pay back over a term of up to 20 years.
If you intend to run your GP practice from the premises you are buying, you will need an owner-occupier mortgage. There is no set maximum amount that you could borrow on a commercial mortgage, and you may be able to get a maximum loan-to-value of around 80%, however commercial mortgages are arranged on an individual basis which will dictate the interest rates you pay and the terms that are offered to you.
Should an unmissable opportunity arise to acquire another premises for your GP practice, or purchase another business to add to your group, a bridging loan may be the ideal funding solution.
A bridging loan gives you short-term access to a large amount of money, and there is no restriction on how this can be used. However, this type of loan must be secured on a property that you already own, and repaid within a maximum of 24 months, so if you are purchasing a property you will need to arrange another type of long-term finance - such as a commercial mortgage - in the meantime.
Acquiring equipment for your GP practice can be made more manageable by using asset finance, which gives you the cash upfront to pay for everything you need to start up your business - from waiting room furniture, to IT and medical equipment, or even a vehicle.
Asset finance spreads the cost of your essential purchases on a term of up to 72 months, and you could get up to 100% funding. There is a wide range of asset financing available for medical equipment, from hire purchase to operating and finance leases, and it can be used to purchase second-hand equipment too.
Bespoke finance for GP practices
There may be several kinds of finance that you need to fund your GP practice, so speak to Rangewell to discuss a bespoke finance package that is tailored to your individual business.
Rangewell is a business finance broker, with experts that will search the entire market to secure exactly the right types of loans for your requirements and guide you through the application process. It takes just five minutes to begin your finance application today, and a member of the Rangewell team will be in touch to discuss your next steps.