Finance to buy a medical practice or GP clinic

Buying a GP clinic or medical centre means buying a stream of future income, most of it generated by doctors who may or may not stay. The building, the equipment and the fit-out are the easy part. The goodwill is what you pay the most for, and it’s also the hardest thing for a lender to rely on. Understanding how lenders think about that is the key to financing an acquisition well.

What does a practice purchase usually include?

Component	What to check
Goodwill	Maintainable earnings, how much follows the vendor, patient numbers
Equipment and fit-out	Age, condition, ownership, anything registered on the PPSR
Lease	Remaining term, options, landlord consent to assign
Staff	Entitlements that transfer, key staff intentions
Doctor agreements	Terms, notice periods, restraints, who’s staying
Records and systems	Patient records transfer, software licences
Transfer costs	Legal, accounting, valuation and any duty that applies

What will a lender look at?

Every lender’s first question is the same: will the income that repays this loan still be there after settlement? To answer it, they’ll look at:

1. Billing history. Several years of billings, split by doctor and by payment source (Medicare, private, incentives).
2. Doctor retention. Who’s staying, on what terms, and what share of income they produce.
3. The vendor’s role. If the vendor is the highest biller and plans to leave, how much income goes with them.
4. The lease. A short remaining term or no landlord consent can derail a sale.
5. Tax position. Payroll tax on contractor doctors has been a live issue for medical centres in several states. Any unpaid exposure matters to a buyer.
6. Your own experience. A buyer who’s worked in general practice or managed a clinic is an easier story.

How is a practice purchase usually funded?

• Property-secured loans from $20,000 to $5,000,000, as first or second mortgages or caveats over residential or commercial property. This is the most common route for acquisitions because goodwill isn’t easy security.
• Vendor terms. The vendor accepts part of the price later, sometimes tied to retained billings. That shares the risk and can reduce what you need to borrow upfront.
• Unsecured facilities for smaller purchases by buyers who already run a trading practice, typically $5,000 to $500,000 worked out from your turnover and recent bank statements.

Allow for working capital after settlement too. New owners often face wage costs, software changes and small upgrades in the first months. If you’re in the middle of negotiating, a short enquiry tells you what’s realistic before you commit.

What should you check before you sign?

business.gov.au’s guidance on buying an existing business suggests confirming licences and permits, reviewing the lease and landlord consent, checking supplier contracts, inspecting equipment, verifying three to five years of financial records and searching the Personal Property Securities Register. For a medical practice, add:

• signed agreements with the doctors who are staying
• billing reports by doctor for at least two years
• accreditation status and any recent findings
• how patient records will be transferred and communicated to patients
• the practice’s payroll tax position, including any contractor GP arrangements

Our due diligence checklist goes through each item in more depth, and our payroll tax guide explains the state rules that have affected medical centres.

How do you protect against doctors leaving?

This is the risk that keeps buyers awake. Common protections include:

• a handover period where the vendor keeps working for an agreed time
• part of the price deferred and tied to billings in the first year
• confirming key doctors’ intentions before exchange, where appropriate
• restraint clauses on the vendor, drafted by a lawyer

None of these removes the risk, but each shares it more fairly between buyer and seller, and lenders take comfort from them.

An illustrative example

Illustrative only. An experienced practice manager and a GP team up to buy a four-doctor clinic from a retiring principal. The principal agrees to work two days a week for a year, and part of the price is deferred against retained billings. Two of the remaining doctors sign new agreements. The buyers own homes with equity. A property-secured loan could fund the upfront part of the price and costs, with a small line of credit for the first months while the new owners settle in.

Buying into a practice instead?

If you’re buying a share from existing owners rather than the whole practice, see practice buy-in loans. If the sale includes the premises, read practice premises loans.

Asset sale or share sale?

Practice sales are usually structured as either an asset sale, where you buy the goodwill, equipment and other assets and set up your own entity, or a share sale, where you buy the company that already runs the practice. An asset sale lets you start with a clean entity, but contracts, registrations and some approvals need to be transferred or re-established. A share sale keeps everything in place but brings the company’s history with it, including any unpaid tax, payroll tax exposure or disputes. Lenders are comfortable with either, as long as the structure is clear and the risks have been looked at. Your lawyer and accountant should recommend the approach before you sign heads of agreement.

See if your purchase could qualify

Buying a practice is one of the biggest decisions you’ll make in your career. The enquiry is one of the smallest: about 60 seconds, with no credit check. We won’t parade your details past a string of lenders. A real person who understands practice sales will call you and work through the numbers.

Please be accurate on the form, especially the price, your state and any property you could offer, so we can match you properly from the first call.

Talk to us about buying a practice →