Finance to purchase a medical practice building

Buying the building your medical practice operates from is one of those decisions that feels significant because it is.

You're looking at commercial lending, which works differently from a standard home loan in ways that matter to how much you borrow, what you put down as deposit, and how the loan is structured. The key thing to understand upfront is that lenders assess these deals based on the property's income-generating ability and your practice's financial position, not just your personal income.

How lenders assess a medical practice building purchase

Lenders will want to see your business financial statements, usually the last two years, along with a cashflow forecast that shows the rent you'll save by owning the premises or the rental income if you're leasing part of it to other practitioners. They're looking at debt service coverage ratio, which is essentially whether your practice generates enough income to cover the loan repayments comfortably, typically with a buffer of at least 1.2 times the repayment amount.

Consider a GP who runs a clinic in Bairnsdale and wants to purchase the building rather than continuing to lease. The property is valued at $850,000. The practice has been operating for eight years with stable patient numbers and employs two other part-time doctors. Annual profit after salaries sits around $280,000. The lender will assess whether that income, combined with any rental income from the other practitioners, can service a loan of say $680,000 with a 20% deposit. They'll also look at the business credit score and whether the practice has existing debts or equipment finance arrangements that affect cashflow.

Secured business loan or unsecured: which applies here

A property purchase will almost always be structured as a secured business loan, with the building itself used as collateral. You won't be looking at unsecured business finance for something of this size because the loan amount is too large and the interest rate would be prohibitive. The property secures the debt, which means the lender has recourse if repayments aren't met, but it also means you'll access a lower interest rate than you would on an unsecured facility.

In some cases, lenders may also require a personal guarantee or additional security, particularly if the practice is relatively new or the building's valuation doesn't quite meet their lending appetite. That's something to ask about upfront because it affects your personal liability.

Deposit requirements and loan structure

Most lenders want a deposit of at least 20% for a commercial property purchase, though some will lend up to 80% of the property value depending on the strength of your business financials and the property type. Medical practices tend to be viewed favourably because they're considered stable, ongoing businesses with predictable income. If you're putting down less than 20%, expect closer scrutiny of your cashflow and possibly a higher interest rate.

The loan structure usually takes the form of a business term loan with either a fixed interest rate or variable interest rate. Fixed rates lock in your repayments for a set period, which can help with budgeting, but you'll sacrifice flexibility if you want to make extra repayments or pay the loan out early. Variable rates offer redraw and flexible repayment options, which can be useful if your practice has seasonal income fluctuations or you want to pay the loan down faster when cashflow allows.

What happens if you're also buying the practice itself

If you're purchasing both the business and the building at the same time, the financing becomes more layered. You'll likely need a combination of business loans to cover the business acquisition and the property purchase. Lenders will assess these separately because they're funding different assets with different risk profiles. The building has tangible value and can be sold if needed. The business value, which includes patient lists, goodwill, and intellectual property, is harder to recover.

In a scenario like this, a specialist in Ballarat is buying both a long-standing dermatology practice and the building it operates from for a combined $1.4 million. The building is valued at $900,000, and the practice goodwill and patient database make up the remaining $500,000. The buyer structures the deal with a $720,000 secured loan against the building and a separate $400,000 facility for the business purchase, using a combination of their own cash and the loan funds. The lender requires proof that the practice generates enough working capital to service both loans, so the buyer provides three years of accounts showing consistent revenue and a business plan outlining how they'll maintain and grow the patient base. The approval takes around three weeks, not because the application is complex, but because the lender wants a commercial valuation of the property and an independent review of the business financials.

Interest rates and repayment terms

Commercial lending doesn't offer the same range of interest rates you'll see on residential home loans, and the rates tend to sit higher, usually between 1% and 2% above standard variable home loan rates depending on the lender and your circumstances. Loan terms typically range from five to fifteen years, though some lenders will go to twenty years if the property is owner-occupied and your financials support it.

Flexible loan terms can include options like interest-only periods for the first few years, which reduces repayments while you establish ownership and manage any fit-out or renovation costs. Some lenders also offer a business line of credit alongside the term loan, which acts as a buffer for working capital or unexpected expenses. That's worth considering if you're planning any upgrades to the building or if your practice tends to have lumpy income.

Why timing matters for express approval

If you've found a building and the vendor wants a quick settlement, you'll need to know whether your lender can move at that pace. Some lenders offer what's marketed as fast business loans or express approval, but in practice, commercial lending still requires valuation, financial review, and legal documentation, which takes time. A realistic timeline is three to four weeks from application to settlement if everything is in order.

Having your business plan, cashflow forecast, and financial statements ready before you start looking at properties will put you in a better position to move when the right building comes up. If you're working with a broker who understands commercial loans, they'll know which lenders can turn around approvals faster and which ones will sit on an application for weeks waiting for extra information.

Getting your application ready

Before you approach a lender or start looking at properties, get your financials in order. That means up-to-date profit and loss statements, balance sheets, tax returns for the practice, and a clear picture of your current debts and cashflow. If you're taking on a large loan amount, lenders will also want to see that you have enough working capital to manage both the loan repayments and any gaps in income.

If you're buying in Victoria or across Australia and want to access business loan options from banks and lenders who understand medical practice finance, it's worth speaking to someone who works in this space regularly. Different lenders have different appetites for commercial property, and knowing which ones are realistic for your situation will save you time and frustration.

Call one of our team or book an appointment at a time that works for you.

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