Newsflash: Funding options available for surgery improvements
If you have identified a need to invest in your surgery premises, whether it be for general improvements, extension plans to accommodate a growing local community or a move into newly built fit-for-purpose premises, the next step is to weigh up the potential funding options available to you.
Each have their own merits and often works are funded by a combination of options:
- Bank Financing – The traditional method of raising finance on owner-occupied surgeries, secured by a legal charge over the practice premises. The healthcare sector remains attractive to both high street and secondary lenders with a guaranteed income stream typically reflected in more favourable terms.
- NHS Funding Agreements – Depending on the type of scheme, different funding options are available under the Premises Costs Directions, whereby commissioners can award funding upto 100% of the project value. However, there may be conditions attached to that funding which need to be understood at the outset, such as potential clawback linked to restrictions on use and requirement for a legal charge and/or other guarantee. Grant documentation is complex and it is important you instruct a professional team who fully understand the legal and practical implications.
- CIL/Section 106 Funding Agreements – This is an option we are seeing more of following the introduction of the ‘Community Infrastructure Levy’, whereby developers are asked to contribute to a pot of money to invest back into the community. Surgeries with close proximity to new developments may qualify for a contribution from the local Council towards surgery extensions/improvement works. Again, the documentation is complex and may also involve clawback linked to restrictions on use.
- Third Party Development Schemes ‘3PD Schemes’ – Given the guaranteed income stream through rent reimbursement, the healthcare sector is also attractive to investors. You may be offered a ‘rack rent’ lease in return for a new purpose-built premises. Such a lease is often for a fixed period of 20/25 years in order for the investor to make a return on their capital investment.
Our specialist GP advisory team have substantial experience in negotiating and advising practices upon each of the above funding options and the associated documentation. It is important to understand the conditions attached to each of the funding options and common pitfalls to avoid.
In our experience, it is important not only to look at the immediate requirements of the practice and its partners but also future proofing the practice for the long term with flexible options for future investment whilst ensuring the business remains attractive to new partners.
It is also important to ensure any funding options are accounted for in the constitutional documents for the practice – such as the Partnership Deed, any Declaration of Trust and Deeds of Retirement for outgoing partners.
If you would like to find out more about funding agreements and how we can assist generally, please contact our specialist team.