Whether you’re new to the world of a private practice or you’ve been doing it for years, there are still a number of important things that you need to keep in mind with regards to borrowing money. By understanding more about the five common mistakes that doctors make when borrowing money, you’ll put yourself in a better position to avoid them in the future.
A Failure to Plan Ahead
The number one mistake that doctors make when it comes to medical financing solutions is a failure to plan. You don’t just need to know how you’re going to spend that money – you also need to understand how you’re going to pay it back and, most importantly, how long. Are you shopping for medical/dental equipment to expand the functionality of your practice? The new income you’ll generate will help you pay the loan back quicker than if, say, you were just hiring new employees. Plan ahead to avoid falling behind later on.
A Failure to Shop for the Best Terms
When you apply for a car loan, your dealer will run your application through a few different financing services to help try to find you the best loan. Why would you then not take the same precautions with something as important as your medical practice? For the best results, always apply with a variety of medical practice financing services and compare and contrast what they offer to help end up in the best situation.
Whenever possible, always try to use a provider like MedTrust Capital that will adjust the terms and conditions on small business loans depending on exactly how you plan on using the money. MedTrust Capital has commercial real estate loans designed for doctors, for example, that are set up in a much different way from other types of small business loans – even if you’re borrowing the exact same amount of money.
Another big mistake that doctors make when borrowing money is assuming that they don’t have to pay attention to the term rate. If you’re taking on a small business loan to help get you through a slow period, a shorter term is obviously something you can work with. If you’re purchasing a commercial building to expand your practice, a 15-year loan isn’t going to cut it. Look for a 25 to 30-year loan in that situation for the absolute best results.
Financing Too Little
Finally, another mistake that doctors make when borrowing money involves overlooking one of the biggest gifts they have: 100% financing. Just because you have the cash on hand to only take out 50% of the money that you need doesn’t mean that you should. Remember that patients can switch practices all the time and some periods will be better than others. If 100% financing is available at terms that are favorable to your practice, it would be a mistake not to take it.