18 Jun Are you considering becoming a partner at a GP practice?
Are you concerned about the financial burden of taking on unsecured debt for your loan and being liable for the existing practice lending?
We understand that this is a common reason for hesitation when considering becoming an equity partner.
However, there is an alternative approach that can address these concerns.
We have experience working with GPs and can help structure facilities in a way that secures your buy-in loan to the practice freehold. Here an example to illustrate how this can work:
Let us say you are looking to buy into a GP practice where the freehold is valued at £1m, and there are four partners, each with an equal share in the practice freehold. The retiring partner’s share would be 25%, valued at £250k. In this scenario, the entire practice lending could be refinanced.
Banks are generally willing to lend up to 100% of the value of the practice freehold. By securing the new facility against the freehold, potentially a lower interest rate can be achieved, compared to that of an unsecured loan. This approach simplifies the financial structure of the practice, eliminating the need for multiple partner loans and a freehold loan.
You may wonder why the existing partners would want to refinance the freehold loan. One reason is that they may have equity tied up in the freehold that they wish to release before retirement. By refinancing the facility, all partners could be brought to a loan parity, with each partner’s loan increasing to £250k. If an existing partner has approximately £50k remaining on their current loan, they could release a further £200k. This released equity could be used for personal purposes, such as paying off a mortgage or contributing to a pension fund.
Each partner would be allocated a share of the freehold loan based on their ownership percentage, and the majority of loan repayments would be covered by the practice notional rent. Additionally, if they are concerned about their exit strategy while taking on additional lending, rest assured that when an existing partner retires or leaves the practice, their loan will be fully repaid as usual when a new incoming partner joins.
Another reason for refinancing the freehold loan could be to achieve a lower interest rate.
Whether you are interested in exploring your options as a potential practice partner or you are an existing partner looking to release equity from the practice freehold, please feel free to get in touch with us.
Assisting with the set up, purchase and expansion of healthcare businesses is what we do.
Contact Saroma, for an initial conversation to explore your options.
