Making it happen: financing your medical practice

For many doctors, deciding to start your own medical practice or joining an established practice, is a long-held aspiration. It’s a goal that can bring significant personal and financial rewards – whether you are a recently fellowed doctor or one with years of experience.

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 or lease 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

OYF Episode 1OYF Episode 1-inview

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.

Play

OYF Episode 2OYF Episode 2-inview

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.

Play

OYF Episode 3OYF Episode 3-inview

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.

Play