Medical Practice Acquisition Loans: Buying a Whole GP Practice
Buying a whole GP or specialist practice? How lenders fund goodwill, value the practice, check due diligence, and treat payroll tax and vendor finance.
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Practice Acquisition · Goodwill · Due Diligence
A medical practice acquisition loan funds the purchase of a whole GP or specialist practice. How lenders fund goodwill, value the practice, check due diligence, and read payroll tax and vendor finance.
Quick Answer
A medical practice acquisition loan funds the purchase of a whole GP or specialist practice, usually the goodwill plus equipment and some working capital, and lenders approve it on billing history, doctor retention and your own clinical standing rather than on property. See how practice acquisition works, or compare business loans that fund the goodwill.
Also called: practice acquisition loan, practice purchase loan, goodwill loan. A goodwill loan funds only the goodwill; an acquisition loan may also cover equipment and working capital.
What is a medical practice acquisition loan?
A medical practice acquisition loan is business finance used to buy an existing GP or specialist practice as a going concern: the patient base, the name, the doctor arrangements, the equipment and the systems that keep it billing. It is different from a practice buy-in, where you buy a share of a partnership and the existing principals stay. In an acquisition you take the whole practice and every obligation that comes with it.
Most of the price is usually goodwill, so lenders treat these as cashflow loans with security behind them rather than as property loans. A typical purchase is funded in layers: an acquisition or business loan for the goodwill, equipment finance for the chairs, couches and diagnostic gear, a working capital buffer for the first months, and the buyer's own deposit. The practice finance guide for medical, dental and vet owners sets out where an acquisition sits against every other practice loan. Buying a dental practice runs on different numbers; that is covered in dental practice acquisition with property and goodwill.
Lender usually funds
- A portion of the goodwill, varying by lender
- Equipment and fitout, often on separate equipment finance
- A working capital buffer for the handover period
- The premises, if bought, on its own property loan
Buyer usually funds
- The deposit or equity contribution
- Accountant, solicitor and valuer fees for due diligence
- Any gap between the valuation and the agreed price
- Earn-out payments, usually out of practice cashflow
How much of the goodwill will a lender fund?
Goodwill lending typically covers a portion of the price, varying by lender, and the size of that portion depends far more on the buyer and the practice than on the purchase price itself. The questions behind it are simple. Do you hold registration and experience in this kind of practice? Has the practice produced steady earnings for long enough to trust? Will the doctors who generate the billings still be there after settlement?
Some lenders run medical professional policies that give weight to your registration and can mean a smaller deposit for established GPs and specialists, at the lender's discretion. Others treat a medical practice like any other service business and want a larger cash contribution. Either way, expect a director's guarantee from the buying entity's directors and a general security over the practice's assets. Where the buyer has property, some lenders also ask for a mortgage over it to support the goodwill portion.
In our own files, the buyers who get the strongest goodwill terms are usually already working in the practice they are buying, because the lender can see the patients follow them. If you are buying into a partnership rather than taking the whole practice, the goodwill and tangible split works differently; see practice buy-in finance for doctors.
How are medical and GP practices valued when buying a medical practice?
Medical and GP practices are usually valued on maintainable earnings and doctor retention, with a multiple applied that reflects the risk of those earnings continuing under a new owner. Maintainable earnings start from the practice's profit, add back the seller's personal and one-off costs, and then deduct a market wage for the clinical work the principal does. That last adjustment matters more in medicine than in most businesses, because much of a small practice's profit is really the owner's own consulting income.
The multiple is indicative and moves with practice size, location, billing mix, accreditation, the length of the premises lease and how many doctors are contracted to stay. Larger multi-doctor practices with managed systems tend to sit higher than a single-principal practice where the seller is the business.
How does the lender use the valuation?
The lender uses the valuation to test the price, not to set it. Many lend against the lower of the agreed price and the independent valuation, and some require a specialist practice valuer on larger deals. If the valuation lands below the contract price, the gap usually comes from the buyer's deposit or a vendor arrangement, not a bigger loan.
Why does doctor retention matter so much?
Doctor retention matters because goodwill walks out the door with the doctors who generate it. A practice where most billings come from the departing principal is worth less to a lender than one where several contracted doctors are staying, even if the profit figures look the same.
What due diligence do lenders check before funding a practice acquisition?
Lenders check the practice's billing data and the Medicare and private split first, then the contracts that keep those billings in place: doctor agreements, the premises lease and the practice's accreditation. The same pack your accountant and solicitor build for due diligence is the pack the lender wants, so it pays to assemble it once and properly.
| Area | What the lender asks for | Why it matters | Common gap |
|---|---|---|---|
| Billing data | Billing reports by doctor, with the Medicare and private split, typically over the last few years | Shows how reliable the income is and who earns it | Billings concentrated in the departing principal |
| Doctor arrangements | Service or contractor agreements, notice periods and restraints | Goodwill follows the doctors | Short notice periods, no restraints or no signed agreements |
| Premises lease | Remaining term, options and the landlord's consent to assign | The practice needs to stay where its patients are | Short remaining term or consent not yet obtained |
| Accreditation and registration | Practice accreditation status, your registration and provider number plans | Billing must continue without a break at handover | Accreditation due for renewal around settlement |
| Financials and tax | Financial statements, BAS and tax returns, with documented add-backs | Supports the maintainable earnings figure | Add-backs claimed but not evidenced |
| Payroll tax position | How doctors are engaged and any state revenue review or ruling | An unpaid liability can sit behind the price | No accountant's review of the contractor model |
| Staff and entitlements | Employee list, leave balances and contracts | Transferred entitlements reduce the real price | Accrued leave not adjusted at settlement |
Two of these rows decide most files: billing data and doctor arrangements. Lenders will often work around a thin financial history if the billing reports are clean and the doctors are signed; they rarely work around the reverse. If you are refinancing an existing practice loan rather than buying, the checks are lighter; see moving a practice loan from a bank to a non-bank lender.
How do state payroll tax rulings affect buying a medical practice?
State payroll tax rulings affect buying a medical practice because they can create payroll tax exposure under contractor arrangements that the buyer inherits, and lenders now ask about it before they fund. After the Thomas and Naaz decision in New South Wales, state revenue offices took the view that payments to contractor doctors through a practice's patient fee collection can count as wages in some arrangements. A practice that has never paid payroll tax on those payments may carry a liability that reaches back years.
New South Wales shows how the position now works. Revenue NSW paused payroll tax audits of medical practices engaging GPs for 12 months from 4 September 2023, recommenced them on 4 September 2024, and now offers a rebate to medical centres paying contractor GPs who meet bulk billing thresholds. Revenue NSW sets out the current medical services guidance (page last updated 17 March 2026, read 6 October 2026).
Other states have moved on their own timetables, several with exemptions or rebates tied to bulk billing, and the rules are tied to dates rather than one national position. Check the current guidance from the revenue office in the state where the practice operates before you rely on any exemption.
For the loan, the issue is simple. A lender will not fund a price that ignores a tax bill the practice may owe, and it will look harder at a practice whose profit depends on not paying one. The acquisitions that settle cleanly usually have an accountant's written view on the payroll tax position before the lender's credit assessment starts, not after.
What should you ask the seller about payroll tax?
Ask how each doctor is engaged, whether the practice has had a state revenue review, whether it has registered or claimed an exemption or rebate, and whether the sale contract gives you a warranty and indemnity for any pre-settlement liability. Your accountant assesses the exposure; your solicitor drafts the protection.
How do vendor finance, earn-outs and staged settlements sit alongside the loan?
Practice sales commonly run vendor finance and earn-outs alongside the loan, and lenders accept them when the vendor's claim sits behind the lender's and the repayments fit the practice's cashflow. With vendor finance, the seller is paid part of the price over time, which reduces the amount you borrow and keeps the seller invested in a smooth handover. Most lenders want that vendor loan subordinated, so it ranks after their security, and they count its repayments when they assess serviceability.
An earn-out ties part of the price to how the practice performs after settlement, often to billings or to doctors staying for an agreed period. It shifts some of the doctor retention risk back to the seller, which lenders like, but it also means the final price is not known at settlement. A staged settlement works the other way: you buy a share first, work alongside the seller, then complete the purchase later, which is close to a buy-in for the first stage.
If you plan to add doctors or rooms once you own the practice, the lender will want to see how that growth is funded too; see business loans to add a practitioner to a clinic.
Should you buy the premises at the same time?
Buying the premises at the same time can work, but it is a separate loan with separate approval, and running both together adds pressure to the deposit and to settlement timing. The premises usually go on a commercial property loan secured by the building, while the practice itself is funded on goodwill and cashflow. Many buyers take the practice first on a lease with an option to buy, then purchase the building once the practice is trading under their name. When the two are bought together, GP practice acquisition with a commercial property loan walks through the combined structure, and the guide to buying a medical centre or consulting suite freehold covers the property side. The Whitecoat pack lists what to gather before either application.
A medical practice acquisition loan is approved on the practice, not just the price. Lenders fund a portion of the goodwill when the billing data is clean, the doctors are contracted to stay and you hold the right registration and experience. The valuation tests the price, due diligence tests the income, and payroll tax under contractor arrangements is now a standard question. Vendor finance and earn-outs can close the gap, as long as they sit behind the lender and fit the cashflow.
Key takeaway: get your accountant's view on maintainable earnings and payroll tax before you apply, because those two answers shape every term the lender offers.Frequently Asked Questions
Getting an acquisition loan for a medical practice is usually harder than getting a car or equipment loan, because most of what you are buying is goodwill rather than an asset a lender can sell. It gets easier when the practice has a clean billing history, the doctors are staying, and you already hold registration and experience in that type of practice. A complete due diligence pack and a realistic deposit do most of the work, so start with how goodwill is assessed.
How profitable owning a GP practice is depends on the billing mix, how many doctors work there and on what arrangements, the rent and the staff costs, so there is no single answer. Lenders look at the practice's maintainable earnings after paying the owner a market rate for their own clinical work, because that is the profit left to repay the loan. Payroll tax under contractor arrangements can change that picture, which is why the practice acquisition numbers should be tested by your accountant before you sign.
The deposit to buy a medical practice depends on how much of the price is goodwill, how long the practice has been billing steadily and your own registration and experience, so it varies by lender rather than following one rule. Goodwill-heavy purchases typically need a larger cash contribution than equipment or property, and some lenders reduce it for established GPs and specialists under medical professional policies. Any gap between the valuation and the agreed price usually comes from your deposit too, and the Whitecoat Hub covers the professional lending range.
A practice acquisition loan is not always the same as a goodwill loan: a goodwill loan funds only the goodwill, while an acquisition loan can also cover equipment, fitout and working capital. Many purchases split the price, with goodwill funded through business loans and the equipment through equipment finance. The split changes the security the lender holds and the term on each part.
Buying a medical practice with vendor finance only is possible when the seller agrees to be paid over time, but it is uncommon for a whole practice because most vendors want the bulk of the price at settlement. More often vendor finance covers a slice of the price and sits behind a lender's loan, with the rest funded by your deposit and an acquisition loan. Your solicitor should set out what happens if repayments stop or doctors leave.
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