Start-up healthcare businesses often require funding to acquire property, assets, staff and medical supplies. What is the best way to raise finance? A range of funding options are available from conventional lenders and specialists operating in the healthcare sector. The best product for you depends on your type of business and what you need the finance for. Let’s look at this in more detail.
The biggest asset for care home businesses is, of course, the property/properties in which the care home(s) are housed. Some start-ups begin by leasing their first property on business terms, but it is always preferable to build value in the business by owning a property as soon as possible.
- Commercial mortgages are the best means of acquiring your first care home and of expanding your business with new properties. Mortgages can also be obtained to redevelop an existing property into a specialist care home, e.g. by extending it to house new medical facilities. There are a variety of conventional and specialist lenders prepared to loan you money, so long as you have the appropriate security. For start-ups this may be difficult, and you may have to put up personal assets as collateral, or provide a cash deposit of 40% plus. Have a chat with us about the best option for you.
GPs have various needs for business funding. As with care homes, GP partnerships often need large capital sums to build, acquire or develop medical centres. You may also need an injection of capital during a merger with another GP practice, or when refinancing in preparation for the retirement of a senior partner.
- Commercial mortgages fund new medical centres, extensions, conversions and acquisitions.
- Invoice finance – As GPs operate as small businesses and are not employed directly by the NHS, payment is received for each patient treated. The NHS is invoiced periodically in the same way as a private sector client, meanwhile the GP has to meet cash flow expenses for payroll, premises and other costs. Invoice finance can help bridge the cash flow gap, unlocking the value of unpaid invoices without you having to wait.
Most dental practices serve a mixture of private and NHS patients, while operating as independent small businesses. In this sense they have some of the same funding requirements as GP practices, with the additional requirement of expensive dental equipment – among them dental chairs, x-ray machines, surgical robots etc.
- Asset finance provides a cost-effective way of acquiring important equipment – which may cost tens of thousands of pounds – without having to take on huge cash loans. This means that start-up dentists are not at a disadvantage to their more cash rich competitors. The equipment is acquired from a leasing company, which then charges monthly repayments for the duration of the lease. The asset itself acts as security for the loan, meaning that start-ups won’t need to put up personal collateral.
- Invoice finance – Assigning the sales ledger to a factoring company may be useful for dental practices, as it enables the purchase of dental supplies and the covering of other expenses without having to dip into an overdraft.
Community pharmacies rely on a mixed portfolio of assets, including the pharmacy property itself, as well as increasingly sophisticated sorting and processing equipment. Day-to-day funding depends on receiving payment for processing NHS prescriptions, which can leave a gap in cash flow.
- Commercial mortgages can be used to acquire new pharmacy buildings or expand the business.
- Asset finance can be used to secure assets such as the latest pharmacy robots without capital outlay.
- Specialist invoice finance can relieve pressure on cash flow while awaiting reimbursement from the NHS.
- Inventory finance or a revolving credit facility can enable new pharmacies to stock up on cosmetics, non-prescription medicines and other stock without depleting cash reserves.
Find Out More
Starting a new healthcare business comes with all the challenges of a start-up in another sector, plus a range of unique funding challenges. Navigate your way to the best and most cost-effective funding options with our Guide to Finance & Funding For The Healthcare Sector, a new free guide which can be downloaded by clicking here. For all questions, or to arrange a free consultation, please call 0345 5050 888.