Funding surgery premises, where the lending works quite differently from ordinary commercial property.
Why GP premises lending is unusual
On a normal commercial mortgage a lender assesses trading profit and asks whether the business can service the debt. On a GP surgery the calculation is frequently driven by notional rent instead.
Notional rent is the reimbursement a practice receives for providing premises. It is contract-backed, predictable and largely independent of how the practice trades in a given year. Lenders with healthcare divisions understand it and price for it.
The consequence is that a well-presented GP premises case can support borrowing that the practice accounts alone would not obviously justify. Our guide to notional rent covers the mechanics.
How much is available
- For qualifying NHS-contracted surgeries, high loan-to-value lending including up to 100% is available from a small number of specialist healthcare desks
- Terms typically to around 25 years
- Serviceability driven primarily by notional rent rather than trading profit
- Other long-term rental income from the premises, such as a pharmacy, a dentist or a private clinic on a proper lease, is taken into account and strengthens the case
Not every lender goes to that level, and the ones that do are not always reachable directly. This is the clearest example in healthcare finance of the choice of lender mattering more than the negotiation.
Presenting it the right way round
The most common error in a GP premises proposal is leading with practice profit and treating notional rent as a footnote. It is the wrong way round, and it understates what the practice can borrow.
A proposal built around the reimbursement position, the security of the contract and the lease arrangements for any sub-let space gets a materially different answer from the same practice’s accounts presented conventionally.
What lenders will want
- Practice accounts and current management figures
- The notional rent position and reimbursement history
- Details of any other tenants in the premises and their leases
- The partnership structure and any imminent changes
- Contract details and any conditions
- The valuation, and the district valuer position where relevant
If your practice is in Scotland
Scotland is on a different path. Under the 2018 Scottish GMS contract there is a long-term transition away from GPs owning their premises, supported by interest-free sustainability loans and health boards taking over ownership and leasing back.
Conventional surgery purchase mortgages are a shrinking part of the Scottish picture as a result. See GP premises finance in Scotland.
Common questions
Is 100% LTV really available?
On qualifying NHS-contracted surgeries, from some lenders, yes, driven by the strength of notional rent and contract income. It is not universal and many lenders cap lower, which is precisely why the choice of lender matters here.
Will partners need to give personal guarantees?
It varies. Healthcare desks will often lend against the premises and contract income without residential security from partners. Where a lender asks for more, it is worth testing the market.
What happens when a partner leaves?
Premises borrowing usually needs revisiting on a partnership change. Plan it rather than react to it. See partnership buy-in and buy-out finance.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.