Making it happen: financing your medical practice
However, starting a practice can be challenging as it demands new skills and a fresh mindset. It means becoming an entrepreneur – a business owner, an employer, a manager and a team leader, as well as a doctor.
Your situation and finance needs
Working out your financing arrangements is a key step in planning your new practice. Your personal situation and finance needs will often shape your practice’s structure, size and location.
Discuss with your financial adviser or accountant your potential cash flow, ability to repay loans and any other existing financial commitments you have, such as a mortgage or personal loan.
These questions can be helpful in guiding your finance needs:
- How much money do you need to borrow?
- How much cash/equity do you have to contribute?
- How will you use the money you borrow?
- How will you meet your debt repayments?
- How long will you need to repay your borrowed funds?
Finance options
There are several aspects to a practice that require significant capital expenditure. You may need to buy into an existing practice, or for your own practice, set it up to look and function in the way you need it to. There will also be equipment that’s essential to providing the services you plan to offer.
Funding these can be done through different types of loans to help you achieve your goals. The loans need to be specific to the type of investment (asset class) as the lifespan and depreciation varies accordingly.
Examples of different loans include:
- A fit-out loan to cover renovation and building costs. This allows fit-out costs to be spread over several years, instead of paying everything up front.
- An equipment loan to buy vital equipment such as imaging or surgical equipment.
- A goodwill loan for doctors buying into an existing practice or buying out a partner who is selling their share.
Each of these types of loans should allow for the practice’s accounting practises and any specific accounting treatments or regulations that need to be considered.
Once Avant Finance have a clear understanding of these factors, our medical finance specialists can assess the suitability of each loan product and ensure it aligns with your needs.
Managing cash flow
Like any business, it can take time for a new practice to make significant revenue.
This is why having a line of credit in place makes good financial sense. It provides working capital to bridge the gap between start-up and when the practice is financially viable. It also helps your business maintain a steady cash flow to pay staff wages, bills and everyday expenses, in addition to unexpected expenses.
Whatever type of finance you choose, make sure it has the right timeframe and level of flexibility to suit your practice’s short and long-term goals.
If you are unsure of what type of finance you need, the Avant Finance team can help you obtain the right solution with less red tape.
Buying versus leasing premises
Another question to consider when setting up your practice is whether it makes more sense to buy or lease a property.
Your choice will depend on several factors, including:
- your cash flow
- whether you’re ready to make a long-term commitment to your practice
- how much you’re willing, and able, to invest upfront.
While you may have a vision of your ideal practice, it’s worth maintaining a flexible mindset. Owning and renting both have pros and cons. The final decision can be shaped by costs and the availability of suitable properties in your preferred location.
If you are looking to purchase, you should consider how you will own the property. For example, will you utilise a separate trading company, trust or self-managed super fund? If you are looking to lease a space, be mindful of requests for personal guarantees or other liabilities that may be included.
Regardless of whether you are going to lease or buy, you should talk with your lawyer as early as possible to ensure you are protecting your new practice and personal assets.
In this video series we unpack some valuable insights for aspiring practice owners
Episode 1: Start with the why
In this episode, Dr Bronwyn King introduces us to the humble yet highly successful GP, Dr Floyd Gomes. With nine practices under his belt and a variety of other entrepreneurial ventures on the go, he is sure to provide some valuable insights to aspiring practice owners.
Episode 2: Location and look
Dr Bronwyn King and Julian Muldoon, expert medical property consultant, unveil the secrets of masterful location and property selection, while Dr Ryan De Cruz helps us to uncover whether practice aesthetic influences staff and patient experiences.
Episode 3: Am I ready to leap?
In this episode, Dr Bronwyn King meets with Mark Amott, a medical practice set-up consultant whose key expertise is to nurture other people’s medical practices to success.
The information in this publication does not constitute legal, financial or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. Persons implementing any recommendations contained in this publication must exercise their own independent skill or judgment or seek appropriate professional advice relevant to their own particular circumstances. Avant Finance and its related entities are not responsible to any person for any loss suffered in connection with the use of this information. Information is only current as at the date of publication.
Information provided in this publication is for general informational and educational purposes only. It does not, and is not intended to, constitute legal, financial or other professional advice and should not be relied upon as such. Any views or opinions expressed are solely those of the individual contributors and do not necessarily reflect those of Avant Finance or its related entities (Avant). Neither Avant nor any contributors warrant that any of the information is current or accurate and no person accepts responsibility for the accuracy or completeness of any material contained in this publication. You should make your own assessment and seek independent professional advice before acting or relying on any of its content. No person, including Avant, the contributors and their associated organisations and any of their respective related entities, is responsible for any loss arising in any way from anyone acting or refraining from acting on the information provided in this publication. The information is only current as of the date of publication.