Finance considerations of starting a practice – from scratch or buy-in

Jeremy Stagg, Head of Avant Finance SA and WA, has extensive experience meeting the funding needs of doctors.

He acknowledges that, “Not everyone aspires to own a practice. But for many doctors, it is a personal goal that ticks a lot of boxes – from achieving a career milestone through to driving personal wealth.”

A doctor’s own skills provide the equity needed

The choice of whether to start a new practice or transition organically from being an associate to becoming a partner in an established practice is a very personal one.

The common thread is that doctors can usually borrow up to 100% of the funds^* needed to achieve their goal.

Jeremy explains, “When it comes to buying a home, lenders want the borrower to provide equity in the form of a deposit or other collateral.”

“The situation is very different when a doctor requires funding to buy into a medical practice or start one from scratch.”

“In this instance, the equity that lenders look for comes in the shape of the extraordinary investment doctors make in their own intellectual property. It is the depth of their professional skills that allows doctors to borrow up to 100% of practice finance needs^*.”

Jeremy adds that doctors do not need to offer their family home as security for practice funding. “This is a valuable plus as it allows doctors to maintain that important distinction between personal and professional finances,” he notes.

Two different ways of financing a practice

The financing options best suited to a doctor’s goals will depend on whether they buy into an established practice or launch a brand new practice.

Buying into an existing practice

Doctors who buy into an existing practice are essentially paying for a share of the goodwill already built up in the practice.

“In this case, we would generally recommend a practice goodwill loan,” says Jeremy.

The value of the goodwill itself will depend on a number of variables including how long the practice has been operating, the lease term, and whether an outgoing partner is exiting or remaining in the business.

Jeremy notes, “The Avant Finance team will work closely with a doctor’s accountant and legal adviser, to assess the value of goodwill, and ensure an optimum outcome.”

Growing a practice from scratch

Starting a medical practice from scratch calls for a different type of finance, often with a blend of loans that address different funding needs.

As a guide, finance is typically required for:

• The cost of fitting out the premises,
• Purchasing practice equipment, which may be done gradually, and
• Providing working capital, often through a line of credit facility, as it can take time for the practice to generate significant revenue.

“It may sound complex,” says Jeremy, “But this is where Avant Finance adds value.”

“We invest time discussing each doctor’s financing needs, which allows us to identify the most suitable options from our own range of practice finance products plus those of our lender partners.”

“As we only work with doctors, meeting with Avant Finance is the equivalent of visiting a specialist – it provides the certainty of receiving expert advice built on the foundation of considerable experience.”

For more information on achieving your goal – be it buying into a practice or starting your own practice from scratch, call us on 1300 99 22 08, or request a free consultation with one of our medical finance specialists.