Are you a GP considering becoming a GP practice partner? Many GP’s dream of becoming a partner in their practice but are unsure what the next steps should be, especially when it comes to raising the money for the buy-in loan.
Fortunately, financial lenders are usually quite keen to provide buy-in loans for GPs. Furthermore, buy-in loans are often provided on an unsecured basis; you will not be required to put up extra security against the loan as a guarentee.
Becoming a GP Practice Partner: What to Expect
In most cases, your chance to become a partner in your GP practice will arise due to one of 2 things. Firstly, an existing partner in the practice is planning to either leave or retire and wish to sell their equity in the business. Secondly, the existing GP practice partners may wish to bring in a new partner without anyone leaving the partnership first. In this case, they will need to be willing to reduce their own ownership percentage.
Lenders do not tend to make a distinction between these 2 situations when making decisions on whether to lend.
Most GP practices are owned (or at least part-owned) by the GP’s, or some of the GP’s, who work in the practice.
Due to the fact that GP’s cannot sell the goodwill of their practice, the loans needed to purchase equity (buy-in loan) are most often calculated on a percentage of the value of the freehold that the partnership owns.
The existing partners of the practice will all need to agree on the percentage of the equity which you can purchase. It is common for all GP practice partners to have an equal equity share in the practice.
For example; if we assume a practice has 4 equal equity partners and the freehold it owns is valued at £2m, each partner will own 255 of the practice, or £500k.
Raising Finance for GP’s
Once the ownership structure has been agreed by all parties, the next step is to raise the buy-in loan itself to purchase your way into the business.
To apply for the buy-in loan, financial lenders will need to see some key information before they can make their decision to lend.
- A personal statement – This must include details of your financial background, your current assets and your monthly income and expenditure.
- Financial accounts of the partnership going back 3 years.
- Personal bank statements going back 3 months.
- Written confirmation of the ownership structure and value of the equity you are purchasing.
- Details on the salary you expect to receive, as well as your share of the notional rent.
There are a few reasons why financial lenders need to see this information before they can make their decision.
First of all, they need details of your personal financial history and professional background to ensure that you yourself are a good investment. They need to analyse and assess your ability to pay back the money based on your financial background.
Secondly, they need details of the financial situation of the practice to ensure that the practice itself is also a good investment. They need to be sure that the practice is likely to be able to make you enough money to pay back their loan.
In most cases, buy-in loans for GPs will be offered on an unsecured basis. It is common for buy-in loans to be offered 100% unsecured, in fact. However, if you wish to, you may be able to put down assets as extra security against the loan. Doing so may be able to secure you a better interest rate.
How long is a buy-in loan term?
In most cases, buy-in loans will be termed at between 15 and 20 years.
Some financial lenders will also allow you to make lump sum payments periodically at no extra cost. This may be during the loan term, or at the end as a balloon payment.
Doing this can help you pay off the loan earlier, which in turn will reduce your interest payments.
How to repay a buy-in loan
One of the biggest driving factors for GPs looking to become a partner is that partners earn more money than the salaried GPs. In fact, the average salary for a GP partner in England is over £100k.
In addition to earning a share of the practice’s income, you will also be entitled to a share of the notional rent.
Your current personal outgoings and your new salary as a partner (less tax) will be used to calculate the loan serviceability.
Benefits to becoming a GP Practice Partner
There are multiple advantages to becoming a partner in your GP practice.
The most obvious is, perhaps, the increase in salary. Not only will your salary increase from what it was as a salaried GP, you will also receive a share of the practice’s notional rent.
Another benefit is that you will have part ownership of the business. This means that you will have a real say in the business operations. As opposed to being merely an employee of the practice, you will have ownership and, thus, a voice.
You will be able to influence decisions such as staffing, recruitment and services on offer.
Another benefit to becoming a partner is that you will have part ownership in a (hopefully) valuable asset. Not only do you have equity in a business, you will own part of the freehold of the practice. Although it is not guaranteed, you can reasonably hope that the value of the freehold will increase over time. Therefore, when you come to exit the business and sell your equity share, you will have made a profit on the increased freehold value.
Disadvantages to becoming a GP practice partner.
Unfortunately, there are some possible drawbacks to being a partner that should be considered.
First of all, the greater responsibility you shoulder as a partner also means you will share more of the duties. You will be expected, in most cases, to perform at least some extra duties as a partner. You will need to understand the rules, regulations and guidance on topics you may never have given much thought to before. For instance, sickness, maternity leave, complaints and disciplinary meetings.
Another disadvantage is that, in becoming a partner, you will also become jointly and severally liable for any loans taken out in the partnership’s name.
Additionally, if the practice freehold should lose value in the time you are a partner, you may lose money when you come to exit the business and sell your share of the freehold.
Become a GP Practice Partner with Raising Finance
If you’re thinking about becoming a partner in your GP practice, contact us today to see how we can make the process easier.
We can assist you with your application for a buy-in loan and help with the deal structure and secure you a competitive interest rate.
With a combined 30 years of experience in the banking industry, especially in the healthcare market. Our network of contacts throughout all the major financial lenders in the UK allows us to find your the best possible price on the market.
We will source several possible deals for you to choose from. This gives you the freedom and security to choose the best price and the right deal for you and your practice.
We can guide you through the borrowing process and help make sure that you raise the finance you need quickly, simply and securely.
See how much you can raise
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