Medical Services Finance Guide

Banking for Medical Professionals

Medical Professional Industries (MPIs) are an essential segment of the Australian economy. Medical and allied health services are highly represented by increased Government support. The banking industry considers MPIs to be a low-risk sector with stable demand and offers a range of significant support and products.

Banking for Medical Professional is a specialised area where relevant skills and experience are required. Our Medical Professionals Finance Guide offers insights into best practices for structuring and accessing debt.

Please complete the form below to enquire now.

ENQUIRE NOW

Medical Professionals Industry

Broadly, Australia's health services industry is valued at over $200 billion. This includes the medical technology (MedTech) sector, which comprises more than 500 companies.

The sector employs over 1.7 million people, accounting for roughly 10% of GDP and standing as Australia's largest employer. There are over 930,000 registered health practitioners across all 16 regulated health professions in Australia.

Main Industry Groups

PART A: COMMON FUNDING NEEDS

MPI businesses can have relatively simple financial structures, though many require modern and high-tech equipment. MPIs commonly seek balance sheet and funding support for the following:

Property Loans for purchasing clinic premises, specialist suites, commercial investment or residential properties.
Funding for Assets & Equipment; e.g. diagnostic machines, surgical instruments, IT systems and other practice essentials.
Funding for clinic fit-outs.
Insurance Premium Funding (such as Professional Indemnity).
Funding for the Acquisition or consolidation of other medical businesses.
Funding for incoming partners or shareholders as part of succession planning. Often, the goodwill of an established practice can be leveraged for buy-ins or partner exits.

Consider these common medical industry funding scenarios below:

1. PROPERTY ACQUISITION

There is a range of funding options for all types of property acquisitions.

Lenders generally view commercial medical properties favourably due to their strong asset profile and stable demand. Where a property has mixed-use or convertible zoning (residential/commercial), finance may be available at loan-to-value ratios (LVR) of up to 90% or 100% for trading businesses. In some cases, if conversion to full residential use is straightforward, the loan may even qualify under residential lending policy.

Lenders Mortgage Insurance (LMI)

Most lenders offer LMI waivers for medical professionals.

CBA: Waives LMI for eligible medical professionals.
ANZ: Waives LMI for eligible medical practitioners, including doctors and dentists registered with AHPRA, (up to 95% LVR).
NAB: Waives LMI on home loans specifically for doctors, lawyers, and financial professionals.
Westpac: Waives LMI for healthcare practitioners and emergency services professionals, (up to 95% LVR) for doctors and other medical specialties.

Repayment Structure

Typically, Principal and Interest or “P&I” repayments are required to ensure the loan balance is fully repaid after a specified term. An initial interest-only period may be available; however, it is wise to consider whether it is necessary, especially since a longer repayment term that amortises from the commencement date is an alternative.

The repayment basis will vary depending on the type of facility. There is generally less flexibility on the timing of repayments for lending compared to property loans.

2. ASSET, EQUIPMENT & FIT OUT FUNDING

Lenders are increasingly using processes that facilitate faster assessment and approvals for Medical Equipment Finance, including:

Online Application: Most specialist lenders offer online applications with streamlined decisions for eligible applicants.
Reduced Documentation: Available with some lenders, especially for loans under a threshold of up to $1 million.
Terms: Repayment schedules can be customised to align with cash flow and equipment type.
Refinance: Negotiation upon repayment or at term maturity (usually 10-15 years) is possible, even with an Interest Only period.

Fit Out Finance

Funding for full or partial medical fit outs such as fixtures, fittings and equipment is common, due to the large financial outlay required. This can include costs such as construction, carpeting, paint and plumbing, etc.

Medical Fit Out Finance Packages can include business loans, equipment finance, or practice drawdown loans. This approach can extend the term and reduce the rate of the loan.

3. INSURANCE PREMIUM FUNDING

Medical professionals can leverage insurance premium funding to efficiently manage and spread the cost of annual insurance, protect cash flow, and access approvals from compliant funders.

Insurance Premium Funding (IPF) includes cover for:

Medical Indemnity
Business Interruption
Workers' Compensation
Professional and Public Liability
Commercial Property
Business Equipment

Premium Funders will pay the annual premium to the insurer on your behalf. The borrower repays in fixed monthly instalments over an agreed term (typically 12 months), with the ability to bundle multiple policies into one payment.

Approval Criteria:

For funding of less than $250,000 - $400,000 no additional security is typically required.
For funding above $400,000 a director’s guarantee may be necessary.
As a guide, the current year’s premium should not be more than 125% of the previous year.
Instant approval is common.

4. INTERNAL SUCCESSION

Credit Providers are flexible in accommodating succession for MPI. This form of finance enables the purchase of an established practice or facilitates the exit and payout of a partner. These loans recognise the value of the practice's reputation rather than relying solely on tangible assets as security.

Repayment Structure

Specifically, this would include a GSA over the trading entity, an SSA over the shares and a personal guarantee from the respective partners.

The extent of the guarantee, unsupported or supported, will vary with each scenario. The lender will also consider the incoming partner's capital position and broader creditworthiness.

SUCCESSION PLANNING

Succession planning should be given priority early in the life of the practice. Health services are highly regulated, meaning that poor succession planning can negatively affect patient continuity, practitioner registrations, and the financial stability of the business. Early scenario planning lays a solid foundation for ongoing patient care and the financial well-being of the business.

SUCCESSION PLANNING CONSIDERATIONS

Leaving the Business
If a practitioner-owner leaves (whether voluntarily or involuntarily), the practice must ensure that patient care can continue seamlessly. Beyond the financial arrangements, consideration should be given to:

Transfer of patient records in compliance with privacy and health records legislation.
Continuity of clinical services, to ensure patient safety and prevent disruption to treatment plans.
Notifying regulators & Medicare (e.g. AHPRA, Medicare provider numbers) regarding changes in practice ownership or providers.

Departing owners can grant call and put options to ensure an orderly ownership transfer, but these arrangements must also address the regulatory approvals required for medical practices.

Valuation
Valuation can be complex in a medical practice due to:

Goodwill attached to the practice versus personal goodwill tied to individual doctors.
Patient list value and continuity (subject to privacy obligations)
Medicare billings, contracts with health funds, and relationships with allied health or hospitals.

Clearly documented valuation methods are vital to avoid disputes.

Licensing & Regulation
Unlike other businesses, medical practices must also consider:

AHPRA registration of practitioners.
Specialist licensing requirements (e.g. radiology, pathology, controlled substances permits).
Accreditation standards (such as RACGP standards for general practices).
Medicare provider numbers and location-specific eligibility.

Succession plans should outline how these considerations will be managed in the event of an ownership change.

Insurance
Medical practices should implement Buy-Sell Agreements supported by appropriate insurance coverage. This typically includes:

• Life insurance and TPD cover for each owner, allowing timely pay-out to a deceased or incapacitated practitioner’s estate.
• Key Person insurance, to cover the costs of potential temporary revenue loss.

This ensures the continuing owners can acquire the outgoing partner’s share without damaging the practice’s financial viability.

Indemnity
The departing owner may be indemnified against ongoing business liabilities after exit. This may require:

Agreement on responsibility for pre-exit clinical liabilities and ensuring run-off professional indemnity insurance is in place.
Allocation of responsibility for practice debts, lease obligations, and employment contracts.
Clearly defined valuation processes for ownership transfer to protect fairness among all parties.

PART B: SECURITY MATTERS

Security (or Collateral) refers to the assets provided as security for a debt. For the credit provider, this serves as protection against potential capital loss.

For Medical Firms, sometimes the "business" entity will typically be the primary security for any lending arrangement. However, much of the practice's value is intangible, as goodwill, Medicare billing history, patient lists, and brand reputation are core drivers of income.

As a result, a Credit Provider may only have recourse on the business and not against other assets such as property.

TYPES OF SECURITY

TANGIBLE & INTANGIBLE SECURITY

While Medical businesses can often borrow on this basis, borrowers must ensure the security provided adequately reflects the resultant impact on price and terms.

As a comparison, consider the options:

Tangible Security: Includes residential or commercial property, business equipment, or other physical assets. These typically result in lower interest rates and longer loan terms.

Intangible Security: Includes General Security Agreements (GSA) over business assets or unsecured loans. These often come with higher interest rates and shorter loan terms. For internal succession, an SSA over the shares and personal guarantee from the respective partners may apply.

Impact on Loan Terms

Residential Property: Terms to 30 years with the lowest interest rates.
Commercial Property: Terms to 25 years with low interest rates.
Business Equipment: Terms up to 5 years with low interest rates.
Business Trading: Terms to 15 years with higher interest rates.
Unsecured Loans: Terms to 3 years with the highest interest rates.

Matching Security to Loan Purpose
The nature of the security should align with the purpose of the loan. For example, acquisitions or expansions may require longer-term facilities, while working capital needs may involve shorter-term unsecured loans.

OTHER FACTORS

FINANCIAL POSITION & SPONSOR BACKGROUND

In most instances, the personal financial position of the applicants will be reviewed, as the capital base accumulated should indirectly reflect their “story”. A lender will look to connect that to some extent.

In all cases, financiers will request a completed Asset & Liability Statement for all individuals. Despite the generally non-recourse nature of these arrangements, this will help assess the ability of the borrowers to amortise debt.

RETIREMENT OF DEBT

The financier will want to see how the debt will be retired. The primary strategies they look for are:

Stability of the Recurring Income received from the Business.
Free cash flow from the broader earnings generated by the business, after debt reduction and working capital variances.
The ability to integrate an acquisition - integrating revenue and managing costs.

KEY CONSIDERATIONS

1. PURPOSE OF FUNDING

The loan term is largely influenced by the purpose of the funding, and the time frame in which benefits will be derived.

For example, an established medical firm acquiring another may qualify for a longer loan term due to the certainty of cash flow.

2. COLLATERAL

The type of collateral provided impacts the loan term and interest rate as noted in the previous section above.

3. REPAYMENT STRUCTURES

Principal & Interest (P&I): Fixed repayments over the loan term, regardless of utilization. Preferred for long-term stability.

Interest Only (IO): No principal repayment for a defined period (typically up to 3 years). Residual repayments may be higher after the IO term.

Upon the IO term maturing, the following P&I term will be based on the total period, less the IO period.

For example: If your loan term was 15 years with 5 years Interest Only, the residual term is 10 years P&I.

IO may suit businesses that want to preserve cash flow. However, P&I from the outset can be desirable in many cases. The best option will come down to the opportunity cost of the “saving” and borrowers need to be aware of this consideration.

4. STRATEGIES FOR BORROWERS

Match Loan Term to Benefits: Ensure the loan term aligns with the duration of benefits generated by the investment. For example, acquisitions or expansions may require longer-term facilities to align with the sustained benefits of the investment.

Plan for Working Capital Cycles: Account for the initial working capital cycle, which can take time to settle and collect income.

PRODUCT OPTIONS

1. PRODUCT TYPES

All Credit Providers have varying funding types which are packaged and presented by lenders in several ways.

Similar to mortgages, which typically move in the same direction as the Reserve Bank cash rate, the base rates for businesses are correlated to changes in these broader funding costs.

Variable rate loans are most popular with medical borrowers as there are usually few or no restrictions. Most variable loans are flexible and allow unlimited additional repayments.

2. RATES & TERMS

Interest rates are subject to a range of pricing variables. Most Credit Providers will have a "reference rate" or similar for smaller or standard loans. The interest rate that applies to each loan is a combination of the reference rate plus or minus the "Margin" applicable to that loan.

For larger facilities, the structure of interest rates will be based on a market driven "Bank Bill Rate" that is referenced to a Bank Bill Swap Rate (BBSW) or similar. An additional margin is then applied to this base rate.

PART E: CAPACITY TO SERVICE DEBT

BORROWING CAPACITY

Assessing borrowing capacity varies between business and property lending. For business, the initial focus is on determining Earnings before Taxes, Interest, Depreciation, Amortisation and the normalisation of "Owners Remuneration" (known as EBITDAO).

Therefore, a first step is therefore validate the actual net earnings before applying further assessment, as shown in the generic example below.

Of course, lenders will consider both the quantity and quality of revenue.

Preferred Revenue Streams

• Private & Mixed Billing: Higher margins and resilience to rebate changes; supports stronger, more predictable cash flow.
• Specialist Services: Non-GP specialists often achieve higher margins and faster growth, strengthening bank assessments.
• Repeat Consultations & Volume: Chronic care, preventive services, and high patient throughput provide reliable income.
• Government Incentives: Ongoing payments for accredited programs add stability, excluding one-off grants etc.

LENDING CAPACITY

Lending capacity is determined by several measures which vary between credit providers. These are three of the most common and applications will vary accordingly to both the purpose of the funding and the nature of the security provided.

1. INTEREST COVER RATIO (ICR)

ICR is a measure of how easily a business can pay interest on outstanding debt. This measure is typically more applicable to "yield assets" such as property where there is a consistent income return.

Tip: ICR will have less application where strong amortisation of debt applies, such as business lending.

2. DEBT SERVICE RATIO (DSR)

DSR is a measure of how easily a business can pay total debt repayments on its outstanding debt. Along with "Debt to EBITDA", this is typically a measure of capacity for an operating businesses.

Tip: DSR can be a more relevant measure of liquidity. Unlike ICR, it includes the actual cash commitment to reducing debt. Where strong amortisation is needed, the gap between DSR and ICR can be wide.

3. DEBT TO EBITDAO

A more holistic measure of outstanding debt, against the total adjusted income of a business. Divides Total Debt by the EBITDAO. The "O" refers to adjusting for the market salary of the practitioner(s).

Here is an example below:

Credit Providers may apply different weightings to historical, current or forecast results depending on the business. Up to around 3.5x EBITDAO or 60-75% of external valuation is not uncommon.

MARKET COMPETITION

We have seen a wide range of Credit Providers offer tailored policies for medical professionals, including high-LVR, waived-LMI mortgages and unsecured practice funding

With further consolidation and scale in the industry, we have seen opportunities for a range of other capital options, both locally and overseas, to enter the market with increased sophistication.

RISK GRADING

Credit Providers have a required Return on Equity (ROE) which forms the basis of their pricing and fee model. The Medical profession has a lower assessed probability of default based on risk grade and calculates the “loss given default” determining the capital cost requirement based on their cost of funds.

LONGER LOAN REPAYMENT TERMS

With the advent of competition, we are seeing the amortisation profile of lending change. Credit providers traditionally want to see new debt amortised over say 5-10 years but this has extended materially in recent times.

For example, for a business acquisition of a "like" business we are seeing credit provider look to extend the overall repayment basis to as much as 15 to 20 years.

HIGHER BORROWING TO INCOME LEVELS

As competition has returned, so has the extension of servicing. We are seeing Debt to EBITDA Multiples out to as much as 4 times leverage in some instances.

INDUSTRY PROFILES

1. GENERAL PRACTITIONER, DENTIST or VENETERIAN

Credit Providers generally like lending funds to these businesses. Key insights in these traditional sectors include:

Size Matters
There is better lender appetite when there is reduced reliance on one key partner or owner.

Revenue Profile
The nature of reliable revenues is a theme in the medical industry. A higher level of recurring income as a portion of total revenue will build confidence in the continued ability to service debt.

Location
Location plays a critical role in determining a practice’s growth and long-term success. Factors such as patient catchment area, population density, and local demographics directly influence demand. Proximity to complementary health facilities—such as hospitals, pharmacies, and other health centres—can further enhance referral opportunities and strengthen credibility.

2. PHSIOTHERAPISTS, OPTOMETRISTS, OSTEOPATH, CHIROPRACTORS ETC.

Other practice business types include Chiropractor, Osteopath, Optometrist or Optical Dispenser, Psychologists, Physiotherapists.

Most of these streams are adding more participants and driving revenue growth. They are attracting the attention of Credit Providers looking for opportunities.

3. PHARMACY

Historically, there has been a strong appetite for credit providers to support the industry. This is driven by the sector's reliable cash flow and the essential nature of products and services.

The pharmacy industry in Australia generated around $26.5 billion in revenue in 2025, with market size projected to keep growing. However, the industry remains highly competitive. Pharmacies are diversifying to include immunisations, health consulting and broader wellness offerings, which are key drivers of future relevance and growth.

Lending support is highly dependent on valuation, financial strength, and owner experience.

PART G: BASIS OF RECOMMENDATIONS

A basis of recommendations is a good step in the lending process. Understanding lending structures and costs will assist you in making an informed decision.

CHOOSING A LENDING STRUCTURE

Structuring Finance is supporting by a range of participating lenders.

Specialist lenders have developed specific credit products. These include, ANZ, Bank of Queensland, CBA, Macquarie Bank, NAB and Westpac, which all source funding differently.

In our experience, the structure and subsequent conduct of borrowings are more material than the credit provider selected. Therefore, it is critical to focus on identifying the needs of the firm first before jumping straight into a credit solution or provider.

UNDERSTANDING LENDING COSTS

All prospective lending terms depend on the borrower’s relative risk of default, combined with a “score” calculated by bespoke risk grading systems that capture qualitative and quantitative measures.

This score presents a required Return on Equity (ROE), which forms the ultimate basis of the lender’s rate pricing and fee model. The modelling considers the probability of default based on risk grade.

Then, it calculates the “loss given default”, which generates the capital cost requirement based on the lender’s cost of funds.

From a cost perspective, upfront fees for lending are higher than those for property lending. A combination of legal, administrative and general application fees also contribute to the overall cost of borrowing.

A comparison of upfront costs and the indicative interest rate should be taken into consideration by the borrower.

APRA

Australian Prudential Regulation Authority. An independent authority that supervises institutions across banking, insurance and superannuation and promotes financial system stability in Australia.

BCOP

“Banking Code of Practice.” Sets out the standards of practice in the banking industry for individual, small business customers, and their guarantors. Can apply to individuals, small business and to certain guarantors of individual or small business loans.

COLLATERAL

The Assets given by a borrower to a credit provider in order to secure a loan. It serves as an assurance that the lender will not suffer a significant loss.

DSR or DSCR

“Debt Service Ratio”. A measure of how easily a business can pay total loan repayments on its outstanding debt relative to EBITDA. Considers principal and interest repayments not just interest.

Debt to EBITDAO

A capacity ratio used by Credit Providers to determine borrowing risk. the ratio represents the total amount of debt owed compared to the Adjusted Earnings of the business; usually known as EBITDA. e.g. Total Debt / EBITDA.

GEARING

Gearing means to borrow money to invest. In lending, gearing (also known as leverage) is the relationship, or ratio, of a company’s debt-to-equity and is used to determine a company’s creditworthiness. (See Negative Gearing)

GSA

A General Security Agreement. This creates a security interest in all present and future assets of the borrower./business. This is similar to a ‘fixed and floating charge’ before the Personal Property Securities Act came into affect (2009). This does not include real property, but can consist of other assets, licenses, and intellectual property of the entity.

ICR

The interest coverage ratio (ICR) shows how easily a business can pay its interest expenses. This measure ignores any principal reduction.

IO or I/O

Interest Only. Where repayments are only covering the interest on the amount borrowed (the principal) for a set period of time. Repayments will vary due to the utilised balance, number of calendar days in a month.

LIMITED RECOURSE

A loan used to purchase a single asset or group of assets where the Credit Provider's claim on assets is limited to the asset(s) securing the loan, if the borrower defaults.

LVR

Loan to value ratio. This is the loan amount divided by the property or sometimes by the business valuation. Always expressed as a percentage.

NBFI

Non-Bank Financial Institution. In other words, a credit provider that does not hold a banking licence.

P&I

Principal & Interest - this is the most common repayment type, it requires a payment towards loan principal along with interest. Repayments are set based on the interest rate.

PPSA

Refers to the Personal Property Securities Act 2009. It is the primary legislation governing the creation, registration, and enforcement of security interests in personal assets across Australia.

ROE

Return on Equity divides Net Profit after Tax by Total Equity to measure how efficiently a business is using its equity to generate profit.

SERVICEABILITY

Capacity. This is a calculation, based on the overall net income position, that lenders use to determine what level of debt can be serviced without reasonable risk of default.

SSA

A Specific Security Agreement is a security interest over a particular asset and is registered on the Personal Property Security Register ("PPSR"). The asset must be uniquely identifiable to be secured on the PPSR. It will accompany a loan agreement and allow the Credit Provider to enforce its collateral if needed.