Do you want to take the next step in your medical career and open up your own practice? How hard is it to finance a medical practice?
With your own private practice, there is complete freedom to have your own team, deliver the kind of quality patient care you want, and have complete control over the financial success of your clinic. This sounds amazing, but this isn’t an easy journey, and you’ll undoubtedly come across a lot of challenges.
You need a strong business vision to begin your medical practice and appropriate financial capital to bring it to reality. Plus, you’ll need to know how to keep your business up to date and set yourself apart from the competition.
In this article, we’ll discuss the pros and cons of various funding models to help you choose the right way to finance your medical practice.
But first, how much will it cost to start a medical practice?
To figure out how much money you need to get started, you need to take into account factors such as:
- Employee salaries
- Required equipment
- Location of practice
- And more…
Without knowing all of this, it isn’t possible to give you an estimate of the amount of money you need. Other factors can influence the overall cost of setting up your practice, including specialty, location, and size.
But if you already know how much you’ll need (or have a decent guess), it’s time actually to get that money…
A Quick Guide To Financing Your First Medical Practice
#1. Write a Business Plan
It would help if you had a business plan to lay down a strong foundation for achieving. It would help if you took ample time to develop a strong business plan that includes your vision for short, medium, and long-term timeframes. This will help you define the vision for your practice along with a step-by-step approach to achieve it.
Some of the important considerations you need to take into account when writing your business plan are as follows:
- What makes your practice the preferred choice for your patients? This will become the unique selling proposition that’ll help you land more patients.
- How can you build a referral network?
- Who do you need to connect with to make word of mouth spread awareness of your practice? How do you market your practice?
- What things would you like to have in your practice? Better facilities, friendly reception staff and an excellent location with parking are some examples.
You can then make your practice stand out more by creating plans to reduce waiting time, developing your own treatment style, along with detailed write-ups on patient care and follow-up.
One way to keep your overall business plan on track is to write a mission statement along with an overarching practice vision.
But keep in mind, your patients are your customers. And because of this, you need excellent ‘customer service. This means greeting your patients by name, developing relationships with them, and making your meeting room an entertaining and enjoyable place to be.
Some extra considerations:
- Come up with a hiring and retention strategy for your administration staff and clinicians.
- Create a thought-out marketing and growth strategy focused on local awareness and building referral bases
All this does not mean that you alone need to take care of everything. We have designed this article to help you get into this mindset to help you partner with the right people to achieve your chosen outcomes. The health space has several firms focused on delivering a few of the above-mentioned goals for medical practices.
According to business finance experts, Credit Capital, creating a solid business plan is essential before applying for a loan, noting that “having a clear plan with accurate forecasts makes it easier for lenders to determine whether or not you have the capacity to repay a loan. Create a thorough business plan and run it through an expert before applying for a loan to prevent losing opportunities”.
#2. Get Expert Help
To build a solid foundation for your medical practice, you should build a team of experts, including financial planners, business advisors, and accountants. For instance, having an accountant on your team will help you minimize tax by adopting the right structure for your medical practice.
Similarly, you can hire a practice manager to take care of important things such as HR or business development. With the growth of your medical practice, this trusted team of advisers will help you achieve your vision.
When you run your own medical practice, you also have the freedom to help the patients in the manner you want. Medical practice is also a business which means you need detailed planning like any other business. Getting together a team of trusted professionals will allow you to build and grow a successful medical practice that accurately reflects your personal and professional goals.
#3. Start Talking to Big Financial Institutions
Banks generally regard doctors as comparatively low-risk professionals who have high earning potential, which means large financial institutions are more willing to give loans to doctors.
For instance, tailored financial solutions are offered by ANZ that specifically cater to healthcare providers. However, a solid application and a well-thought-out business plan are necessary for you to get finance for your medical practice.
Lenders consider various factors to assess the eligibility of potential borrowers for a short-term or fixed business loan. Some of these factors include your savings track record, earnings, as well as employment history, and business plan. If a bank approves your loan, they will offer a specific amount of money along with a repayment plan.
Advantages of a Traditional Bank Loan
One of the main benefits is that you will get a higher amount of credit. In some cases, you might be eligible for a short-term loan of up to $50,000 or even 100% of the fit-out cost.
These loans also typically come with longer repayment plans when compared with other types of loans.
What if I have bad credit?
In this situation, acquiring a loan from a traditional bank can be difficult. However, there are alternative lenders you can approach. According to business lenders Max Funding, there are other ways to show you can pay your loan back, noting that “We had a business owner who had defaulted on his credit. But we could see from his business finances that he was performing well and had a stable income. This was used to support his loan of $120,000”.
Photo by Pexelson
#4. Consider Acquiring a Running Medical Practice
Many financial institutions are willing to finance up to 100% of the buying price for practitioners looking to acquire an existing medical practice. The practitioners also have a variety of options for adapting the loan as per their requirements, including:
- A variety of repayment options are specifically designed as per your financial situation and tax needs.
- Re-drawing on existing goodwill equity to get a loan for other needs.
- Covering stamp duty and conveyancing by leveraging available services.
According to M.T Medical, a laser tattoo removal clinic, acquiring a medical practice is a much more cost-effective option, noting that “one of the most expensive aspects of starting a new practice is purchasing equipment. This can cost you tens of thousands of dollars, even hundreds of thousands depending on your service when you buy it now. When you buy an existing practice, you save a small fortune from not needing to buy brand new equipment”.
The biggest benefit of acquiring an existing medical practice is that all the practice and business processes are there. You only have to invest money into existing staff, equipment, and locations. This saves a lot of time and allows you to focus on patients.
Acquiring an existing practice also means honoring the agreements already in place. If you would like to implement changes, you will need to wait for the existing contracts to expire.
#5. Consolidate and Refinancing Your Loans
It can be daunting to get a new loan for your medical practice if you already have credit card debt, student loan, or home loan. One of the options you have is refinancing the current loan, which means you pay out the existing loan by getting a new loan. It is also possible to consolidate all the existing debts by combining various loans into a single loan.
Refinancing allows you to pay off the existing loans sooner. It can be done by getting the new loan at a cheaper rate as compared to the rate of the existing loan and by making sure that the term of new loan doesn’t extend beyond the time left on the existing loan, and by making more frequent or larger than the required payments.
There is also the option of consolidating your loans with the help of refinancing. This simplifies paying off existing debts as you now need to manage only one loan from a single financial institution. Consolidation also saves money if you can get the new loan at better terms, a reduced interest rate, or lower fees.
Loan consolidation is effective only if you make additional payments to pay off the inflated loan. Also, refinancing existing loans comes with additional costs, and fees can add up over time. You need to sit down and calculate the overall cost of an existing loan to compare it with the cost of a new loan before deciding.
Starting your own medical practice is a daunting task. There are things to consider, such as developing a medical practice website strategy, following a medical marketing practice to grow your practice. Still, most importantly – you need to get the money actually to fund your practice. Hopefully, reading through this guide will help you achieve that and point you in the right direction.
Keep in mind, for any financial decisions you make now and in the future. It is best to consult with a professional.