Have you been thinking about becoming a partner at your surgery and you are not sure about what your next step should be, or if you will be able to secure funding?
Don’t be concerned, most lenders are keen to lend finance for GPs for the buy-in loan that you will require, and lenders are not generally seeking additional security to secure the facilities they will lend on an unsecured basis
So, what you should expect when trying to become a partner in your GP surgery?
There are normally two situations when you will be offered the chance to buy into a practice as a partner.
- An existing partner is retiring/leaving and wants to sell their share of the partnership,
- The existing partners would like to bring a new partner in and they will be willing to reduce their current ownership share so you can buy-in.
Either scenario is acceptable to lenders who are used to providing finance for GPs.
Most doctors own the doctor’s surgery where they are based as GP’s can’t sell the goodwill of the practice, so buy-in loans are normally calculated on a percentage of the freehold owned by the partnership.
The partners will all need to agree the percentage that you will need to purchase (most partners would all have an equal ownership share of the practice). Based on a partnership of 4 GP’s with all partners having a 25% ownership and the freehold being valued at £1m, the buy-in amount needed would be £250k.
The freehold value would need to be confirmed by an independent valuer and all the partners must agree to the final buy-in figure.
Finance for GPs
Once you have agreed a price with the other partners you will now need to raise the funds to purchase your share. So, lenders will need to see from you:
- A personal profile which details your background assets and your monthly income/outgoings
- 3 years of financial accounts for the partnership
- 3 months personal bank statements
- Confirmation of the amount and the percentage that you are buying
- An indication of the salary that you will earn as a partner and what share of the notional rent you will receive
This information is needed by lenders to assess firstly, whether you can afford the loan against your present lifestyle/expenditure, and also that the business you are buying into is financially sound.
The majority of buy-in loans agreed are on an unsecured basis, but you can offer additional security if you wanted to secure a lower interest rate. That being said, most lenders will be comfortable funding 100% of the buy-in amount totally unsecured.
How long is the loan term?
Buy-in loans are normally termed over 15-20 years. Some banks will allow you to make lump sum repayments with no charge, which can help reduce the term and allow you to repay the loan earlier if that is your plan.
The next question would be…
How do you pay for the loan?
Most partners earn more than a salaried GP. As a partner you will earn a share of the practice profits and a share of the notional rent. The average salary for a partner in England is over £100k.
The loan serviceability will be calculated on your new salary, less tax and your current personal outgoings.
The benefits of becoming a GP partner
Firstly, you have a say in how the practice is run. You will have an input on who the practice employs and what new services the practice can look to offer.
Of course, there is also the increased income. As a partner you will receive a higher salary and notional rent from the practice.
You will now own part of an asset, being the freehold of the practice. Once you come to the point of leaving or retiring from the practice, you would have hoped that the asset would have increased in value and you will receive a higher return on the asset than what you originally paid.
As with most things in life, there are also negatives to becoming a partner.
The negatives of becoming a GP partner
You will shoulder more of the responsibility. Unlike being a salaried GP, you are responsible for the running of the practice and will have extra duties as a partner.
If the practice has any loans in the partnership name, you will be jointly and severally liable for that facility once you become a partner. Make sure you understand the full financial position at the practice.
What are the other important factors to take into account?
Partnership agreements make sure that you sign an up-to-date copy of the agreement once you become a partner. This will set out their rules and expectations at the practice.
Once you become a partner, you are no longer an employee. You will need to understand sickness, annual leave entitlement, paternity/maternity leave and how the practice deals with any disciplinary matters.
How can Samera help?
So, how can we at Samera Finance help you achieve your goal of being a partner at a practice? Firstly, we have 30 years of collective experience within the banking sector, and for the last 10 years we have been specialising within the healthcare sector.
Samera finance can help with an initial assessment, deal structure and help negotiate a competitive interest rate. We have contacts in all the major banks, contacts who have experience of lending finance for GPs to ensure that you get the correct deal, especially in respect of the fees and rates of interest. Deal with the wrong lender and they may not give you the favourable rates from which healthcare professionals benefit.
We will obtain for you several offers of finance, enabling you to select the deal that suits your own circumstances. We will guide you through the lending process and be the point of contact for the lender when they are unable to talk to you while you are working. This enables you to carry on working, and if we need to talk through any points with you, we are available in the early evening to do so.
Contact us today for a free consultation to find out how Samera can help.
For more information on finance, check out our Learning Center here.