Business Term Loans for Practice Purchase and Goodwills

What is goodwill?

Goodwill is the intrinsic value of a practice - that is the value of a practice, excluding its property, equipment and other physical assets. Goodwill includes the value in the patient base, reputation of the practice, consistent good service and range of services, and more specifically, the future cashflow that should be achievable if the transition of the goodwill is managed well. It also includes all those non-physical assets that belong to a practice such as the practice's name/brand, IP information, phone numbers, websites, and so on.

How do you calculate the value of goodwill?

At BOQ Specialist, we consider a combination of EBITDA, which is earnings before interest, taxes, depreciation, and amortization, as well as practice gross revenue to measure the value of a practice.

It is really important for anybody wanting to buy into a practice to get an experienced accountant to help them assess the value of the business. This will help ensure you are not over paying. Conversely, if the practice is selling too cheaply you may also need to understand why. It's important to make sure that you use an accountant that understands how medical, dental and veterinary practices work.

What do you take security over for a goodwill loan?

For a goodwill loan, the goodwill and equipment of the practice is used as security. If you’re buying into a practice partnership, existing partners can remain unaffected as we only take a security interest over your share of the partnership.

For a partnership buy-in, does the practice need to guarantee my individual loan?

If you’re buying into a practice partnership, existing partners can remain unaffected as we only take a security interest over your share of the partnership.

Do I have to borrow against my home with a goodwill loan?

No – you do not have to borrow against your home or other personal property with a goodwill loan. At BOQ Specialist, we understand the value of your profession and recognise the time it takes for a practice to build goodwill. Our extensive experience in lending to doctors, dentists and vets means we we’re able to use the goodwill and equipment of the existing practice as security, rather than your home or other personal property.

Is there any additional security required for a goodwill loan?

Given the intangible nature of goodwill and strong reliance on the practitioner/s to maintain and build goodwill within the practice, we require the borrower or primary practitioner/s to obtain or provide evidence of life and income protection cover sufficient to cover any loan balances secured by goodwill.

How much of the purchase price can I borrow?

Pending credit approval, we can lend up to 100% of the purchase price of an existing practice, or share in a partnership.

How do you determine my ability to service the goodwill loan?

Depending on your unique lending scenario, we may rely on a combination of both the income from the practice being acquired and current personal billings (if contractor or employee) to determine serviceability and income capability as an owner/manager practitioner when assessing a goodwill loan.

What is an example of a lending structure for a practice purchase loan?

Our consultants are happy to run through an example of a practice purchase with you, based on a real client case study. Simply call your local finance specialist or our Client Service Centre.

How do you fund a practice purchase via goodwill?

Practice purchase contracts will generally include a goodwill and equipment component. We tend to fund the goodwill component via a goodwill loan facility and the equipment component via an asset finance product (such as lease or chattel mortgage).

Can I draw against goodwill in my practice?

Yes, we can lend against the goodwill you have acquired in your practice to assist with growing or expanding your practice further.

What information do I need to apply for a goodwill loan?

Your local finance specialist will be able to provide you with a list of the information required to apply for a goodwill loan. This will include:

• Financial statements of the existing practice or practice being acquired (2-3 years is preferred);
• Personal financials; and
• Purchase contract.

Do I need a valuation of the practice?

No. At BOQ Specialist, we do not require a valuation of the goodwill of a practice. However, clients may elect to obtain independent valuations to help guide them as to a fair purchase price.

What is the interest rate and what are the repayments of a goodwill loan?

Our goodwill loans offer competitive fixed and variable rate options. You can choose a flexible loan structure and repayment terms to suit your cashflow needs.

How can I structure my goodwill loan?

Our goodwill loans can be amortised over 15 years* and can be structured as interest only for up to three years with either variable or fixed repayments. All repayments are scheduled on a monthly basis on a date that suits your cashflow needs.

*Subject to credit approval

Can I do an Interest Only goodwill loan?

We offer up to three years interest only*. Speak with your local finance specialist about tailoring a finance solution to suit your needs.

*Subject to credit approval

Can I borrow to manage my cashflow as well?

Yes, we can help you to manage your cashflow via a secured or unsecured overdraft facility, subject to credit approval.