How to finance a healthcare business

Healthcare providers have a specific set of funding needs and often benefit from tailored solutions. There are so many ways to raise funding for your healthcare business beyond dipping into your savings. In order to fully understand the best course of action in financing your healthcare practice, we have compiled a list of the criteria you will need to navigate yourself around the process from start to finish. 

What is healthcare funding?

Healthcare funding is any type of finance arrangement taken out by businesses in the healthcare sector to fund a specific need to their business / industry: 

Borrows include:

  • Pharmacies
  • Private hospitals
  • Dental surgeries GP surgeries
  • Day care services
  • Special needs schools
  • Opticians
  • Veterinary surgeries

What does a healthcare business need to fund? 

The healthcare industry is a huge industry in the UK including private clinics, the ongoing NHS system, paediatric care facilities, edlery care and pharmacies. The healthcare industry has immense investment potential due to the importance of it in everyone’s lives especially in the current climate. 

Healthcare businesses are becoming more and more important as there is now more space within the healthcare sector for your business to grow. Businesses can now avail of this funding to push themselves further into the mainstream healthcare market. 

As healthcare is a very diverse sector covering a wide range of businesses, funding needs are equally varied. You need finances to fund:

  • Any mergers and acquisitions
  • Purchase new surgeries and clinics
  • Assist with cash flow, growth and cost savings
  • Acquire medical drugs and products 
  • Expand or convert an existing property

The following are things your healthcare practice will need to fund: 

  • Property (buy/rent)
  • Equipment/stock (PPE, drugs etc)
  • Large medical assets (surgery chairs, scanners etc)
  • Staff
  • Working capital
  • Marketing
  • Associated costs (legal, accounting, hr etc)

How to apply for finance for a healthcare business

When you apply for finance, lenders will need to see various documents including your business plans and other documents relating to your cash flow and business prospects. You will need to show:

  • Business asset and liabilities statement 
  • Three years business accounts (if applicable)
  • Business management figures
  • Six months of business bank statements
  • Complete details of NHS contract and performance indicators. 
  • director/ partner payslips for the last three months of your latest p60 with six months of personal bank statements if you are a contractor 

Creating a Business Plan

A business plan is more than a documented plan. It is a very important guide that helps you outline and achieve your goals. It is also an important management tool that allows you to analyse results, make strategic decisions and showcase potential lenders how your business will operate as well as grow and profit. 

Essentially, writing a business plan will improve your businesses chances of securing necessary funding and becoming successful. 

Your business plan should be at the forefront of everything you do when approaching lenders and considering any type of loan / financing options. This business plan needs to be in depth and attached to any application you submit. 

Your business plan should be the first thing you complete, it is a great start for you before you tackle the rest of your application as should be done to a great standard if you hope to be given any funding. 

What funding is available for healthcare businesses?

Secured vs unsecured loans

There are two main types of loans which are either secured or unsecured. 

Secured loans refer to businesses that borrow money and use an asset as security to pay back that loan. If  the repayments are unable to be made, the lender is able to sell the asset in order to get their money back. 

Unsecured loans are when your business borrows money without using any of its assets as security. 

Essentially, the less you borrow, the quicker you are expected to pay it back. If the amount you borrow is a significantly larger amount, you are able to pay it over a longer period of time. 

It is important to note that not all business loans are the same and you need to ensure that the terms of your particular loan is right for your situation. Whether you are a start-up or a small business, you can get a loan that is suitable and specifically designed for you. 

Asset Finance

Asset finance is a cost effective, low risk way of acquiring new premises or high value equipment. Whether you are a start-up or you are looking to expand. Asset finance helps you optimise cash flow while you prepare for growth and gives you access to all the latest medical technology.  

Your asset finance payments cover the value of any equipment you need including interest and any additional fees charged by the lender. 

Eligible Assets

You can take out asset finance for a wide range of medical equipment, as well as non medical assets used to support your healthcare business for example: 

  • Automation systems 
  • Operating theatres
  • Corrective laser eye therapy machines
  • Dental chairs and surgical equipment 
  • Diagnostic scanners e.g. MRI, CT and X-ray machines

Asset Refinance 

A good way to increase liquidity is by using a medical asset you already own as collateral for a cash loan worth the resale value of the asset. This is a great form of bridging finance when waiting for a commercial mortgage or a longer term loan or as an alternative to invoice finance.  

Hire purchase or leasing 

One of the biggest attractions of using asset finance is that there is no need for capital outlay or any security needed. Instead the new asset is either hired or leased from a leasing company. 

Leasing means the asset needs to be returned to the leasing company after the contracted period has ended or exchanged for a newer version of the asset, in which case the lease continues on similar terms. 

Hire purchase agreements are a bit different as you acquire full ownership of the asset at the end of the payment term. 

Acquisition Finance

Acquisition finance is the capital that is usually obtained for the purpose of buying another business. By acquiring another company, a smaller company can increase the size of its operations and benefit from the economies achieved through the purchase. Throughout the numerous changes over the last couple of pandemic years there are now various new lenders for acquisition finance accompanied by new deal structures and new lending criteria. 

Acquisition financing will allow you to gain capital specifically for the purpose of buying your new premises or equipment for your business. We can guide you through the best cost effective ways to do this and mentor you through how it will affect you and your business. 

Commercial Mortgages

Commercial mortgages are similar to regular mortgages in many ways but there are a few features that make them slightly different. These differences include the interest rate being slightly higher than regular residential mortgages as these types of mortgages are of a higher risk to lenders. Due to this risk, you usually would need to provide an asset such as a property as collateral which will allow your lender to give you a better interest rate. Your interest rate will also be dependent on how much your loan is worth and how long you plan to pay it back, amongst many other factors your lender will later decide on. 

Deposits for commercial loans or mortgages can often be quite hefty so, before you apply for your commercial loan you need to ensure that you will be able to pay both the deposit and your monthly instalments back comfortably and assure your lender of this. 

Tax Loans

A lot of business owners are not aware of the options that are available to them when they do not have enough to pay the necessary tax loans are incredibly helpful and convenient to help you pay your tax bill on time. 

VAT funding can be very useful when quarterly VAT payments are due and there is limited cash flow available to secure paying the bill. VAT funding enables businesses to pay your quarterly tax payments over the course of an agreed term (usually 12 months). This will usually be paid back over a series of monthly payments. Unlike many other loans, detailed business plans and security assets are not necessary for this type of loan. Many processes are quick and flexible with great affordability and transparency. 

Commercial Loans for Healthcare Businesses

We’ve been helping to fund the future of British healthcare businesses for over 20 years and our team are made up of former bankers with decades of experience in the UK’s healthcare lending sector.

You can find out more about working with Samera and the financial services we offer by booking a free consultation with one of the Samera team at a time that suits you (including evenings) or by reading more about our financial services at the links below.

For more information on raising finance for your healthcare business, including more articles, videos and webinars check out our Learning Centre here, full of articles and webinars like our How to Guide on Financing a Dental Practice.

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