Healthcare funding: medical, dental, allied health and pharmacy

People always need healthcare, and lenders know it. Medical clinics, dental surgeries, physiotherapy and allied health practices, and pharmacies tend to have steady patient demand, recurring income and long-term relationships with their communities. That makes them attractive borrowers. The funding needs are often large, though, because clinical equipment and fit-outs are expensive and buying a practice is a major step.

What healthcare businesses borrow for

• Clinical equipment. Dental chairs, imaging, sterilisation, diagnostic and treatment equipment.
• Fit-outs. Treatment rooms, plumbing, compliance-ready spaces and reception areas.
• Buying a practice. Purchasing an existing practice, buying into a partnership or acquiring a retiring practitioner’s patient list.
• Opening a new site. Expanding to a second location or building a new clinic.
• Working capital. Managing the gap while billings are processed, or funding stock for pharmacies.
• Premises. Buying the building the practice operates from, often through a related entity.

How lenders assess healthcare businesses

Lenders usually look at billings and income over the last one to two years, patient numbers and trends, the mix of practitioners and how dependent the practice is on any one of them. For acquisitions, they’ll examine the target practice’s history and how many patients are likely to stay after the change of ownership.

The lease matters for fit-outs. A specialised clinical fit-out has limited value to anyone else, so lenders want to see a long lease or options to renew. Where the practice owns its premises, that property can become security for larger loans. See commercial property loans.

Facilities that fit

Term loan. For a fit-out, acquisition or one-off project, with fixed repayments over a set term. Smaller amounts may be unsecured.

Equipment finance. For clinical equipment, secured on the asset itself.

Line of credit. For working capital needs, stock in pharmacies, or smoothing cash flow between billing and payment. See business lines of credit.

Property-secured lending. For premises purchases, multi-site expansions or larger acquisitions.

Buying or buying into a practice

Purchasing a practice is often the biggest financial decision a practitioner makes. Lenders will want to see the practice’s income history, the patient base, the lease and the transition plan. If the seller is staying on for a period to introduce patients, that’s a strength. Our guide on buying out a business partner covers similar issues where a practitioner is leaving a shared practice.

Practical tips for practice owners

• Keep billing data organised. Clear reports on billings and patient numbers speed up any application.
• Plan equipment upgrades. Replacing equipment on a schedule avoids emergency purchases.
• Review the lease early. Negotiate renewal options before committing to a major fit-out.
• Separate property and practice. Holding premises in a separate entity can simplify both lending and future sale.

Allied health and growing practices

Allied health businesses such as physiotherapy, psychology, podiatry and speech pathology often grow quickly once a good reputation builds, adding practitioners and rooms year by year. Each new practitioner brings fit-out, equipment and a ramp-up period before their books fill. Lenders like to see how previous practitioners ramped up and how quickly they became profitable, because it shows the growth model works. A line of credit or term loan sized to one or two new practitioners at a time is often easier to arrange than a single large loan for an ambitious multi-room plan.

Pharmacies and stock

Pharmacies have a different profile from other healthcare businesses, with significant stock and supplier arrangements. Lenders familiar with the sector look at turnover, gross margin and stock levels. A line of credit is common for managing stock, while acquisitions and refits are typically funded with term loans, sometimes with property security.

Billing cycles and working capital

Not every practice is paid on the day. Some services are billed to insurers, schemes or third parties that pay on their own timetable, while patients on payment plans spread their fees over months. The result is a gap between treating patients and receiving the money, which grows as the practice grows. Lenders will want to understand the mix: how much is paid on the day, how much comes from third parties and how long those payments typically take. A practice with a clear picture of its billing cycle can size a line of credit precisely, instead of borrowing more than it needs or running short at the wrong moment.

Fund your practice’s next step

Tell us about your practice and what you need through our short enquiry form. There’s no credit check to enquire, your file stays with one team, and a real person will tell you which structure suits a healthcare business like yours. Tell us about your practice.