Building & Refurbishment Projects
Working space is limited in many medical practices and this may necessitate internal reorganisation, building extensions or even practice relocation.
John Baker advises on how best to fund this type of project. This may involve a joint borrowing plan with a customer’s own bank and actually sharing the borrowings as part of an overall jointly syndicated package. In many cases banks actually prefer this type of arrangement and may look more favourably at applications that are presented in this way.
All the costs must be separated to ensure the best taxable benefits are in place to cover all specialist equipment and work carried out. Experienced finance brokers can help in this regard by using a blend of tailor-made finance, unsecured loans, HP and leasing. It is quite feasible to arrange completely unsecured building and refurbishment loans in excess of £150,000.
Some elements of building work can be leased, providing it can be classified as ‘assets’ or plant and equipment. Builder’s estimates can be scrutinised to see what goods qualify for Annual Investment Allowances and how this is best funded. Ask about this option when planning a project.
All builders like to be reassured they will be paid on time and stage payments can be made if required. It is vital that the cost of assets and equipment are looked at separately to the costs of ground works; decorating, plumbing, electrics, and labour charges.
It is vitally important that businesses do not waste the opportunity to maximise tax relief and this must be checked at the quotation stage by the finance provider or broker.
A quick guide to preparing finance applications for larger value projects
You will need:
A recent copy of your current Business Accounts
Lenders require up-to-date proof of your recent income.
Full copies of your most recent business accounts will always be needed and usually for the last financial year.
If recent accounts are not available, we may ask for the last 6 months business bank statements.
If you are buying an existing practice, we shall need recent accounts for the previous owner. Management accounts may also be requested.
Asset & Liability Statement
This is an informal overview of your personal net worth and business assets, home, rental property values and investments.
Most lenders will require this information.
The list must show details of all loans and other credit you may have.
We will send you a form to fill in. It requires no more than 10 minutes of your time to complete.
For new practice starts and some large projects an accurate budget is needed for the cost of equipment, computers, fixtures and fittings, building-work, and all costs associated with the project.
We will give you an illustration of monthly payments for items financed on Hire Purchase, or Lease, (which is usually for equipment).
We will also provide loan repayment amounts. You must incorporate these monthly payments in a cash-flow forecast, with an estimate of proposed income and expenditure for the first two years of your project.
This will provide lenders with evidence of your ability to service your outgoings, and this is absolutely vital for larger value projects and especially new practice start-ups.
A Business Plan
You must clearly describe your objectives and why you need finance.
Provide this in a business plan, and outline your career and CV.
Tell us what you intend to do and why you are planning to do it.
Include timeframes, marketing and supporting information that will be useful to the lenders.
Keep lenders informed - they will be influencing your future!
Other vital information we may require:
- Note that details will be needed for all partners involved in the project.
- A list of the suppliers you are using, plus cost and details of equipment.
- A written estimate for building works and refurbishment costs.
- A confirmation of Planning Permission (e.g. for D1 surgery use)
- Confirmation of premises tenancy agreement, showing the rent you will be paying
- Proof of ownership for the freehold business premises relating to the project
- If you already have a bank loan in place, we may need to see proof of the offer
- Recent copies of utility bills and/or passport(s), to prove applicant’s UK residency
- Current home address, and previous address(es) if less than 3 years at current one
- For a Limited Company: Director’s names, Company registration number, Registered Office address
We will ensure your application is processed quickly.
We advise that you obtain an approval of finance before equipment and fittings are ordered. Some suppliers may not build your order or start work unless they know you have finance in place.
The average approval time for larger size applications is fast usually just 2-3 days.