Funding the transition when a partner joins or leaves, without draining the practice’s cash to do it.
Why this matters more than it used to
The retirement of a partner with significant capital tied up in the premises can destabilise a practice. The remaining partners have to find the money, at a point when recruitment is already difficult.
From the other direction, the up-front cost of buying in is one of the main obstacles to recruiting new partners at all. A salaried GP looking at a substantial capital requirement often decides against partnership entirely.
Funding the transition properly, rather than absorbing it into practice cash, protects the business through the change and makes partnership a realistic proposition for the incoming GP.
Buying in
Funding for an incoming partner’s share can frequently be secured against the share being acquired rather than against your home. The assessment rests on the practice’s position and the security of its contract income rather than purely on your personal balance sheet.
Continuing partners are generally unaffected by an incoming partner’s borrowing where it is structured this way. That is worth making clear to the partnership early, because it removes a common objection.
Buying out
Where continuing partners are acquiring a retiring share, the funding sits with the practice or the remaining partners. The key questions are how the outgoing share is valued, whether it includes premises, and how the borrowing sits alongside any existing premises facility.
Where the practice already has premises borrowing, it is frequently better to restructure the whole position at the same time rather than layering a second facility on top of the first.
Where premises are involved
A buy-in or buy-out involving premises is really two transactions: a share of a trading partnership, and a share of a property. They are assessed differently and can be funded differently.
Where notional rent supports the premises element, the funding available for that part can be considerably more generous than for the goodwill-equivalent element. Splitting them deliberately rather than treating the whole as one number usually produces a better result.
Timing
Partnership changes have a habit of being discussed for a long time and then needing to complete quickly. Getting an agreement in principle early, before the retirement date is fixed, removes the funding from the critical path.
Common questions
Will I need to secure it against my house?
Frequently not. Healthcare lending desks will often lend against the partnership share and the practice’s contract income. Where a lender requires residential security, it is worth testing whether another would not.
Where borrowing would be secured on your home, or is a loan to you as an individual of £25,000 or less, it may fall under mortgage or consumer credit regulation. We arrange unregulated business finance only, so we will tell you at the outset if that applies and point you towards an appropriately authorised adviser.
Can the practice borrow rather than the individual?
Both structures exist and the right one depends on the partnership agreement, the tax position and what the other partners want. Worth taking accountancy advice alongside the funding conversation.
What if the outgoing partner’s share is disputed?
Get the valuation settled before applying. Lenders will not proceed on an unresolved figure, and starting the funding process early on an agreed basis is far smoother than doing both at once.
Related: GP surgery commercial mortgages and GP surgery refinance.
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.