Healthcare practice acquisition finance for private clinics

A private clinic rarely owns much that a lender could sell. Couches, ultrasound units, lasers and IT are usually a small share of the price and depreciate quickly. The value sits in things that only exist while the practice keeps trading:

• The patient base and booking pipeline: active patients, courses already booked, recall lists and the online reviews that bring in new enquiries.
• Referral relationships: consultants, GPs, sports clubs, employers buying occupational health, and solicitors instructing medico-legal reports.
• Insurer recognition and contracts: provider recognition with private medical insurers, NHS-commissioned activity, and corporate wellbeing agreements, each of which may need consent or re-application under a new owner.
• The clinical team: employed and self-employed practitioners whose patients follow them, not the brass plate.
• Regulatory standing: an existing CQC registration and inspection record where the services fall within CQC scope.

Because each of these can walk away after completion, the funding conversation is really about how durable they are. The more of the income that is tied to the seller personally, the less a lender will advance against it and the more of the price will need to be deferred or funded by the buyer.

Where a clinic carries out regulated activities, CQC registration belongs to the legal entity that provides the service. That makes the choice between buying shares and buying assets far more than a tax question. If you buy the shares of the company that holds the registration, the provider stays the same and you notify changes such as a new nominated individual or registered manager. If you buy the business and assets into your own company, that company generally needs its own registration in place before it can provide regulated activities. CQC's guidance on buying, selling or transferring a registered business sets out the steps, and lenders will normally make registration, or a clear route to it, a condition of releasing funds.

Other conditions that commonly set the timetable:

• Landlord consent to assign the lease, or a new lease, with enough term left to outlast the loan.
• Insurer provider recognition and NHS or corporate contracts confirmed for the new owner.
• Employees transferring under TUPE rules on business transfers, with their contracts, holiday and any pension obligations understood.
• Professional registration of the clinicians who will deliver the service, for example with the HCPC, GMC, NMC or General Chiropractic Council.
• Transfer of clinical records and data protection responsibilities, agreed with the seller and your advisers.

Illustration only, with round hypothetical figures and no rates. A physiotherapist agrees to buy the clinic where they have worked for several years for £400,000, including equipment valued at £40,000. The seller treats about a third of patients and will retire.

• The buyer contributes £100,000 from savings and pays legal, due diligence and valuation costs separately.
• The seller agrees to defer £50,000, paid over two years and conditional on staying on part-time for the first six months to introduce patients and referrers.
• A term loan of £250,000 over seven years funds the balance, secured by a debenture over the new company with a personal guarantee from the buyer.
• A separate hire purchase agreement replaces two ageing shockwave and ultrasound units after completion, so the loan is not stretched to cover kit.

The lender's affordability test uses profit after the cost of a clinician replacing the seller's sessions, less the buyer's drawings. The deferred payments reduce the risk on day one and align the seller with a good handover.

Goodwill finance is usually more expensive than property lending because the lender has less to fall back on, and personal guarantees mean the risk sits with you as well as the company. Paying too much is the most common and least fixable mistake: if the price assumes every self-employed practitioner stays, the debt has to be serviced from a smaller business if one leaves. Overlapping short-term borrowing on top of a goodwill loan can also strain cash in the first year, when patient numbers can dip during the handover. Our guide to personal guarantees explains what you are signing. Sometimes the better answer is a smaller deal, a longer deferred element or a phased purchase of a partner's share rather than the whole clinic at once.