Finance question
Can I get finance to buy a medical or dental practice?
Often yes. Lenders like regulated professions with steady income, so medical and dental practice purchases are among the better-supported business buys, and lenders will fund goodwill, not just property. Specialist health banks publish up to 100% of the purchase price of an established practice, though many deals settle at 70 to 90% with the balance from savings or home equity, subject to lender assessment.
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The short answer
Few sectors get lenders to fund the goodwill
A practice sale is mostly goodwill: the patient list and the practitioners who see them. There is little physical security behind it, so lenders look hard at the profession and the earnings. GP practices generally trade at 1.5 to 4 times adjusted net profit, where adjusted means the seller's drawings, one-off costs and related-party rent are normalised (medical practice guide). Dental practices are listed from about $160,000 for a single-surgery clinic to $2m plus, and most established practices trade between $700,000 and $2m (dental practice guide). Expect the lender to want a valuation that supports the price, not just the asking figure.
Dentists are one of the few professions where lenders will fund the goodwill itself. The dental guide notes that specialist health banks publish up to 100% of the purchase price of an established practice, secured on the goodwill and equipment rather than the family home, with terms to 15 years. The top of that range needs clean three-year financials, a valuation that supports the price and a buyer with a registration history and no adverse credit, and many deals settle at 70 to 90% with the balance from savings or home equity (dental practice guide). Medical practices also draw better-than-average lender appetite, because the income is stable and the profession is regulated (medical practice guide).
Most deals are layered. Goodwill goes on a practice purchase loan, equipment due for replacement goes on its own equipment facility, and any freehold is funded as a commercial property loan so the practice loan covers only the business. Splitting the equipment out is usually the smart approach (medical and dental practice finance guide). Budget for costs on top of the price, including legal, accounting and valuation fees of $15,000 to $35,000, and the working capital lenders like to see, $50,000 to $100,000 on a mid-sized practice (dental practice guide). Ventas is a broker across 40+ lenders, not a single bank, and there is no upfront fee to you; the lender pays us on settlement.
Do you qualify?
What a lender looks at on a practice purchase.
Clean financials
Three years of practice financials that reconcile to the BAS and tax returns.
Registration and record
A registration history and a clean credit file count in your favour.
A valuation that holds
Priced on adjusted profit, not the vendor's gross fees figure.
Your contribution
Savings or home equity for the gap, plus working capital.
Why practice purchases fund better than most
Stable, regulated income
Lenders weigh the profession and the billings, not only the assets.
Goodwill can be funded
Specialist health lenders lend against the practice, not just property.
Equipment split off
Chairs and imaging can finance on their own value, apart from the goodwill loan.
A worked example
A dentist buys an established practice for $1.2 million, inside the band where most established practices trade. A health lender advances 80%, about $960,000, secured on the goodwill and equipment. The remaining $240,000 comes from $100,000 of savings and $140,000 drawn from equity in their home, with stock and working capital covered from cash. Illustrative only.
Common questions
Frequently asked questions
Can I borrow the full price of a practice?
Some specialist health banks publish up to 100% of the purchase price of an established practice. The top of that range needs clean three-year financials, a valuation that supports the price and a clean credit file. Many deals settle at 70 to 90%, with the balance from savings or home equity.
Do I need to own property to buy a practice?
No. Health lenders can secure a practice loan on the goodwill and equipment rather than the family home. Property security widens the choice of lenders and can lower the cost, but in this sector it is a choice, not a requirement.
What decides how much a lender will fund?
Mainly the practice's adjusted profit, how dependent it is on the departing owner, and how many practitioners stay on after the sale. A GP practice generally prices at 1.5 to 4 times adjusted net profit, and doctor retention is the biggest swing factor.
Do I pay stamp duty when I buy a practice?
It depends on the state. Queensland, Western Australia and the Northern Territory charge transfer duty on goodwill and assets, while New South Wales and Victoria do not for a pure business sale. Confirm it with your accountant before you sign.