Healthcare business mortgages

What each sector can borrow

These are the levels specialist healthcare lenders work to. A general commercial desk at the same bank will often quote you 60% to 70% on the identical case, because it is pricing bricks rather than the business — which is the single most common reason a healthcare buyer is told they need a deposit they do not actually need.

A £750,000 dental practice at 90% needs £75,000 rather than £225,000. On a care home at 65%, the same purchase price needs £262,500. Knowing which side of that line your business sits on before you agree a price is the whole game.

Why healthcare borrows more than other businesses

Ordinary commercial lending is secured on a building, so the loan is capped by what the building is worth. Healthcare lending is secured on the business — its contracted income, its patient or resident list, its regulatory permissions — and that changes the arithmetic entirely.

• Goodwill is fundable. When you buy a dental practice, most of the price is goodwill rather than bricks. General commercial lenders will not fund goodwill; healthcare lenders will, and it is why 90% is achievable
• NHS income is treated as near-contractual. A GDS or GMS contract, a pharmacy contract, or NHS dental income in Scotland under the Statement of Dental Remuneration is the most predictable revenue a lender ever sees
• Sector failure rates are very low. Dental and GP practice failures are rare compared with hospitality or retail, and lender pricing reflects it
• Demand is demographic. An ageing population and the NHS backlog underpin the sector independently of the economy
• There is a strong resale market. Corporate consolidators buy practices continually, so a lender's exit is well established

Buying a practice

1. Get funding confirmed before you offer

   In dental and veterinary in particular, the seller's agent will ask about funding before accepting an offer, and a buyer with terms already agreed regularly beats a higher offer without them. This costs nothing to establish.

2. Understand what you are actually buying

   An asset purchase buys the goodwill, equipment and contracts; a share purchase buys the company, and with it every historic liability. Lenders treat them differently, and a share purchase needs proper due diligence. Your solicitor and accountant lead this — we make sure the funding structure matches whichever route you take.

3. Adjusted EBITDA is the number that matters

   Lenders rebuild the accounts: adding back the outgoing principal's drawings, removing one-off costs, and deducting a market-rate salary for whoever will do the clinical work. That adjusted figure, not the headline profit, is what the loan is sized against.

4. Debt service cover

   Most healthcare lenders want adjusted profit to exceed the loan payments by 25% to 40%. Care homes are commonly held to 130%–175% depending on loan to value.

5. Regulatory transfer

   CQC in England, Care Inspectorate in Scotland, CIW in Wales, RQIA in Northern Ireland. Registration does not transfer automatically with the business, and completion is usually conditional on it. Start this early — it is the most common cause of a delayed completion.

Partnership buy-ins and buy-outs

Buying into a GP partnership, a dental practice or a veterinary group is funded differently from an outright purchase. You are acquiring a share of goodwill and, usually, a share of the premises.

Typical structures run 7 to 15 years, and where premises are involved the term can extend considerably further. For GP partners the premises element is supported by NHS reimbursement, which makes it one of the more comfortable pieces of borrowing in the professional world.

The same applies in reverse. Buying out a retiring partner, or funding a departing shareholder, is routine lending — it just has to be structured so the practice can carry it alongside the existing debt.

Refinancing an existing practice or home

Most healthcare businesses are on borrowing arranged at the point of purchase and never looked at again. Given how much the sector's lending appetite has moved, that is usually money left on the table.

• Release equity — a practice bought five years ago has usually grown its adjusted EBITDA, and the loan can be resized against the current figure to fund the next thing
• Fund a second site — often the cheapest capital available, because it is raised against a proven trading business rather than a new one
• Buy out a partner or shareholder without disturbing the practice's working capital
• Move off a maturing facility — short-term facilities arranged during acquisition frequently roll onto poor terms once the initial period ends
• Refurbishment and expansion — new surgeries, additional treatment rooms, extra bedrooms. Capital expenditure that raises capacity is generally welcomed by lenders
• Consolidate equipment finance — practices often accumulate several asset finance agreements at rates well above a secured commercial loan

Care homes — what lenders scrutinise

A care home is a trading business in regulated premises, and lending is more conservative than in practice finance because the security is the building and the operation rather than a transferable patient list.

• Regulator rating — the single biggest factor. Most lenders want Good or Outstanding (or the Care Inspectorate equivalent in Scotland). A Requires Improvement rating typically halves the loan to value available and raises the rate materially
• Occupancy — lenders generally want 80% or above; below about 75% the income becomes hard to underwrite
• Fee mix — a home with more than half its residents privately funded achieves better terms than one dependent on local authority placements, because the margins are stronger
• Operator experience — a first-time buyer with no care background will struggle regardless of the numbers. Registered manager credentials matter
• Staffing and agency spend — high agency usage signals fragility and reduces the adjusted EBITDA a lender will work from

If you are in Scotland

• Care homes are regulated by the Care Inspectorate, not CQC. Lenders' published criteria usually cite the English regulator; the Scottish grading scale maps across, but it needs explaining to the credit team rather than assuming they will do it
• NHS dental income in Scotland runs through the Statement of Dental Remuneration rather than the English UDA system, which changes how a lender models the income
• GP premises funding follows the Scottish Government premises directions, which differ from the English arrangements
• Commercial security in Scotland is taken by standard security and the conveyancing runs on a different timetable — worth building into the completion date rather than discovering late

What we will need to see

• Three years of practice or company accounts, plus current management accounts if the year end is more than six months old
• For a purchase: the sales memorandum, and the schedule of NHS contract income or UDA allocation
• Your CV and evidence of clinical registration or, for a care home, the registered manager's credentials
• The most recent regulator inspection report
• For a care home: an occupancy history and a breakdown of fee income by funding source
• A personal assets and liabilities statement for each borrower or guarantor
• Your business plan for the site — briefly, but lenders do read it