The MedTrust Capital BlogThe Latest Information on Medical Practice Financing
Business is complicated. Business debt is even more complicated. No business wants to be in debt, and yet smart financing has built some of history’s most successful companies. Business debt is not “good” or “bad” as a concept. It’s better to think of business debt as a tool that successful companies use to grow and operate.
Currently, healthcare is a business in the United States. Like any other business, medical practices utilize financing in a variety of ways. Successful medical practices use financing to grow and operate. Financing a medical practice should not be simply borrowing money when you need it. Successful medical practices are able to make financing work for them.
Check out MedTrust Capital Group today and allow us to help you. The first step in medical practice financing is having a clear goal, allow us to help you achieve it.
Why Should I Take Out Medical Practice Finance Loans?
Medical practices should only get financing when it makes sense for business goals. Financing is readily available for most types of medical practices. But just because financing is available doesn’t mean your healthcare business should take out a loan.
Healthcare practices can finance inventory and working capital. These are two clear business goals that come up during a start-up, expansion, unexpected business event, or business pivot. Working capital financing can be used for almost any business expense imaginable.
Healthcare practices can finance commercial real estate purchases. This type of financing can be very lucrative and help the practice create long term revenue and wealth. Financing the purchase of the building or buildings a practice operates in can be one of the smartest business choices a medical practice makes.
Healthcare practices can finance the equipment they need. This can be a special loan just for the equipment, or it can be part of a bigger financing package during expansion, renovation, or start-up.
Healthcare practices that are starting-up, expanding, or renovating often need financing. High tech equipment, highly trained health professional employees, and space for a growing business are all reasons that a practice might need financing.
Why financing is the only option most of the time
Healthcare practices are expensive to run, and they are expensive to purchase. If you’re buying an existing practice, financing is really the only option most of the time. But even when it’s not, often financing is the smartest option.
Whether you are starting a new medical practice or expanding an existing one, the existing business debt can always be renegotiated and in fact, refinancing business debt is an excellent way to use financing to help a healthcare practice. Getting cash for improvements while lowering your monthly payments can be a great business decision.
Related: Expansion Financing
What type of loan options do physicians have for their medical practice?
Luckily for physicians, financing a medical practice is not difficult. Big banks are “hungry” for loans for doctors, which are considered very lucrative for the bank because of the high profits involved in the healthcare business and relatively low-risk. But an easy loan is not always the smartest option.
Medical practices can finance specific loans for medical equipment. They can also utilize lines of credit. These types of financing can work for some healthcare practices. Alternatively, medical practices can utilize term loans, which allow for very specific financial planning and forecasting since the loan payment is set on a schedule.
Practices can also utilize general medical practice loans and SBA loans. SBA loans are special loans from the government for small businesses only with strict rules about how the funds are used. These loans can be beneficial because of their flexible terms.
Related: Types of Loans offered
Questions to ask yourself before applying for loans
Before you begin researching whether you’ll apply for financing, consider these important questions about your healthcare business.
First– how much do you need? It’s better to overestimate than come up short. Next and possibly more importantly– what do you need financing for? Talk to an expert at your bank. Talk to your accountant. Collaborate with your professional network to see what other practices are doing. Do you need financing or do you need to cut expenses? Do you need new equipment or do you need new staff?
Next, what is your credit score? You can find this information online or at your bank. A good score makes lending terms more flexible, but a poor score is not a complete roadblock. Again, talk to the experts, including speaking with MedTrust Capital Group.
We are medical practice financing experts and understand how to navigate some of the trickier parts of financing a practice. Banks won’t often turn you down (but some will) but regardless, it’s important to make sure that your financing makes sense for your business.
What makes sense for your business goals is what you can comfortably pay back each month. If your revenue is already down and there is no plan beyond the working capital you need to make it to the end of the month, your practice needs more than working capital– even if you can afford the monthly payment.
Do you have other outstanding loans besides student loan debt? It might be time to refinance the whole business debt. While MedTrust Capital Group does not work to refinance your student financing, we can work to help refinance your existing business debt into a more manageable and sustainable payment which can ultimately help grow your business and personal wealth.
Reasons why Physicians take out loans
A physician gets financing for their practice for a variety of reasons. A physician who wants to succeed in business will always talk to their bank or a niche financing expert first before applying or even considering financing. It’s important they have a clear business goal in mind for their financing and a clear understanding of their financing options. Not all loans are created equal and not all loans paid back quickly at low-interest rates make the most business sense. Each individual case and business situation is different and each case should be handled as such. This is the benefit of working with a niche lender like MedTrust Capital Group.
If your medical practice or healthcare business needs financing, it’s important. Make sure you research lenders, options, and most importantly your own business needs.
Related: Buying a Practice
Talk to MedTrust Capital Group today. We will give you a no-hassle, free consultation on your business financing and help you ourselves as a niche lender, or direct you to your best next step.
Our client became a doctor to help people. She works for a large corporate healthcare system in a big city. She makes good money– enough to cover her student loans and live a comfortable life.
But that wasn’t why she became a doctor. She wanted to help people. She sees the big systemic problems in her job and realizes she’s not doing what she set out to do.
She goes back to her “Why?” She thinks maybe she can help her patients have better outcomes if she was in charge of her own practice. Maybe she can get back to helping people if she had her own practice.
The details change, but when doctors go back to their “Why” they often find themselves wanting to start their own medical practice. Sometimes the “Why” is to help more patients, sometimes the “Why” is to have more time with their family. Sometimes it’s just to get ahead of the student loan payments. And that’s the first step in starting a medical practice. Go to your “Why?”
What Type of Medical Practice Do You Want to Open?
If you know your “Why,” then you’ll know what type of medical practice you’ll be starting. Your goals are going to determine your practice. First think about your “Why” and then research the types of healthcare practice you could start.
Start a Group Medical Practice
A group medical practice with several doctors can help spread out costs and time. It can give patients more choice. It also takes collaboration and compromise, but you might have an easier and lower cost starting a medical practice with the assistance of other medical professionals.
Start a Federally Qualified Health Center
You can start a new practice as a federally qualified health center. This is like being part of a hospital system, but it can be a very safe way of starting a successful medical practice. You won’t be as independent as a sole proprietorship practice, obviously.
Start a Solo Practice
A solo practice might be exactly what you’re looking to do. You’ll wear several different hats and be able to practice healthcare exactly as you see it. You’ll be able to hire and fire your “Dream Team.” You will also bear the responsibility of the business as well as the care you provide.
Start a University or Academic Health Center
You can start a practice within a university or academic health center setting, helping educate future healthcare providers, minimizing your personal business risks, but also operating with less autonomy than a typical small business.
Start a Medical Practice within an Existing Hospital System
Start your practice within an existing hospital system. In some ways you’ll be more like an employee, but in other ways you’ll have some flexibility in your practice and you will have access to the hospital system’s resources. Many urgent care clinics are joint ventures, so if that’s your “Why”– look into this option.
Once you know “Why” and you know what type of practice will serve that “Why,” it’s time to get started. If you’re already Googling “How to Start a Medical Practice” you’ve already got some ideas, but the first step is always going to be making sure you’re credentialed and licensed.
Ready to start your own medical practice? Learn about Med Trust Capital Group’s comprehesive financing solutions for healthcare professionals.
Step 1. Licenses and Credentials
It sounds obvious, but making sure your paperwork is in order will make things extremely easy for the next step– obtaining funding. Make sure you are properly credentialed and licensed for the type of medical practice you’re starting. Once you are– financing comes next.
Step 2. Financing
Financing a medical practice start-up is easier than some other types of start-ups, but it’s not easy. You’ll need to make sure you talk with several different lenders. It always helps to talk with a specialty healthcare practice lender like MedTrust Capital Group, but do your research and find the lender with the best rates. Talk to your accountant and financial advisor because low rates don’t always create the best debt structure.
When you’re financing your practice, you’ll have to have a detailed business plan already in place for any start-up financing. This is usually in the form of detailed spreadsheets and documents, and can also include pictures and video. It can include marketing materials and webpages. It can be as simple or as complex as it needs to show the legitimacy and profitability of the practice. The business plan needs to clearly describe the business as a legal entity, so again it’s helpful to talk to a lawyer and an accountant and make sure the business-side of the practice is set up the way you want and will be set up in a way that is sustainable for the future.
Want to know more about your financial options when starting a medical practice? Med Trust Capital Group will customize a loan package to fit the needs of your new practice.
Related Link: Healthcare Group Practice Financing
Step 3. Starting a Medical Practice
When you have financing and a line of credit you’ll need to set up your space, purchase equipment, and hire staff. Presently, some new health practices are using telemedicine and not purchasing new offices or even equipment, but they do need to purchase software and customer management tools, and computer equipment. Healthcare practices that use specialized equipment need to purchase or lease this equipment before opening and make sure the terms and conditions work for the practice’s financial future.
Even the smallest healthcare practices need help, especially with administrative tasks and insurance services. You will have to consider hiring full or part time staff or whether you can hire independent contractors to take care of various non-healthcare related tasks.
You’ll also have to consider marketing and sustaining the business as it grows or sustains itself.
Now You’re on Your Way to Starting a Medical Practice
These 3 steps are easier read than done, and there are several moving parts in each one, but starting a medical practice doesn’t have to be overwhelming and doctors just like you do it every day. Each step is just as important– don’t skip or discount the importance of any step. Being credentialed, getting financing, and starting the practice are all like links in a chain. If any of the links is not strong enough the process will fall apart.
Ready to apply for financing your new medical practice? Apply with Med Trust Capital Group, a trusted lender for healthcare professionals.
Related Link: SBA vs. Conventional Loans
Fire Your CPA!
Yes, we’re serious. Fire your CPA.
Most healthcare and small business CPAs (maybe yours) have been trained to be very conservative. In our experience, conservative financial planning means missed opportunities. Instead of planning conservatively, consider a plan that minimizes risk and maximizes opportunity.
There is a big difference between the two.
If your practice is buying real estate a conservative CPA will often recommend your practice pay a higher down payment to minimize the monthly payment, lower the interest rate, and shorten the length of your financing. But financing is not just interest rate and term length. After that big down payment for a small interest rate adjustment what will your bank account look like? It’s possible your practice can get financing for the building with no money down and use the extra cash you would have used for the big down payment to purchase yet another building!
A conservative CPA might recommend increasing your monthly payments to get out of debt faster. If you can afford it—why not? The conservative strategy ignores your cash flow. We’ve demonstrated with our clients that a long-term financing strategy, (paying less monthly and using the extra monthly cash saved to invest back into the practice or into retirement accounts) can actually build wealth!
How can your practice minimize its risk but also maximize its opportunities? This is different for every practice. But a strictly conservative plan by a risk-averse CPA unfamiliar with healthcare lending will miss the opportunities every time. Before you finance a new building, an acquisition, an expansion, buy new equipment, or hire a new team, talk to MedTrust Capital Group. We are the healthcare practice financing experts with a long history of securing financing for medical, dental, optometric, veterinarian, and other types of healthcare practices.
You might wind up firing your CPA.
Guest blogger Rod Johnston from Omni Practice Sales knows about buying and selling dental practices. Here is his expert advice on how to buy a dental practice in 16 steps.
Buying a dental practice is like getting a colonoscopy. You know you should probably do it, but it can sometimes be a pain in the nether region. But just like getting a colonoscopy, it can go very smooth if you follow the right steps and use the right professional. Here are a few steps to consider which can make for happy times in the end. No pun intended.
1. Have good clinical skills. Be sure you have the clinical skills to produce the same or more production than the average dentist. In other words, don’t buy a practice right out of dental school when it takes you two hours to prep a crown. Unless you’re super-dentist and can prep a crown in 45 minutes right out of school.
2. Buy existing or startup new. Decide if you want to start up a new practice, or buy an existing practice. We recommend starting by looking for an existing practice in the area you’d like to practice. If after a period of time you cannot find a practice and the numbers make sense in your location of choice, analyze doing a startup. Cash flow is king in dental practice financing and in paying your student loans, so look for an existing practice first and then look at doing a startup.
3. Dental Professional Team. Get professional help from professionals that specialize in dentistry. This includes your attorney, CPA, Banker, and Broker. Just like you don’t want your plumber doing your colonoscopy, you don’t want a bankruptcy attorney helping you with your dental practice purchase and sale agreement.
4. Educate yourself on buying a practice. Know how to read a financial statement, practice management reports, lease terms, etc. There is a lot of information online, such as in the Dentaltown Forums, and other areas where you can get this for free. Your professionals that you will be working with can also help educate you.
5. Find your practice. Use the brokers in the area to help you, as well as study club and state and local association contacts to find a practice of your choice.
6. Stop looking for the Unicorn! Neither a unicorn nor a perfect practice exists. Don’t cross a practice off a list because the carpet is green and you wanted brown. Or, everything else in the practice looks good, but the staff is overpaid. You can’t glue a pointy horn on a horse and call it a unicorn. But, you can change the carpet, paint the walls, reduce staff pay, add endo to the practice, etc. You will be in the practice for a long time, so don’t poo-poo the practice because of a change that the practice can handle.
7. Gather practice documents. At a minimum, you want the following:
a. 3 years tax returns
b. 3 years profit and loss statement
c. 3 years production by procedures and production by provider report
d. Copy of the current lease and any amendments
e. Practice statistics report showing patient demographics and other information
f. Aging balance
g. List of staff salaries and benefits
h. Any associate dentist agreements
i. List of any vendor contracts
j. List of equipment
k. Fee Schedule
8. Consider your offer. So you like most everything about the practice and you want to make an offer. You can work with your professional dental broker or consultant and put together an offer. You’ll want to analyze the purchase price. If you’ve educated yourself, you can do this on your own. If not, you can use a dental professional broker, CPA or consultant to help you put the offer together. The offer is in the form of a Letter of Intent.
9. Get a Loan. Banks love dentists. The failure rate is less than .0125%. Being a successful dentist is like finding a coffee shop in Seattle. It’s pretty hard to miss. Ask your broker, attorney, consultant, etc., for a referral to a lender. Use someone reputable who does dental practice financing. Do not use Suzie Q the local commercial banker. She will treat it like any other commercial transaction and try to run it through the SBA ending poorly with high fees.
10. Completing Due Diligence. After you have agreed to a purchase price and both parties have signed a letter of intent, you will want to schedule due diligence in the office. Prepare ahead of time for due diligence. Know which reports you want to run and what the plan is for the due diligence. You’ll want to truly see what the active patient count is. You will want to review charts. You will want to take a closer look at the equipment. I would also suggest seeing if the seller is available for lunch, or to at least come into the office after due diligence. This will help you get all of your questions answered by the doctor himself/herself.
11. Preparing to Transition. The real work begins here as far as the transition goes. There are somewhere between 50 to 70 items to get done prior to the closing of the sale. We have a checklist if you’d like to see it. This includes everything from setting up a legal entity to getting insurance credentials to ordering a credit card terminal.
12. Staff. All through the process, the staff is hopefully unaware there is a sale going on. The meetings and due diligence have happened in the dark of night, or on weekends all while wearing camouflage. (Kidding about the camouflage.) The reason the staff is not informed of the sale is there is a potential they may leave. Part of the goodwill of the practice is staff. If they all leave, there may be a potential loss of goodwill. We recommend the seller tell the staff when there is a 99% certainty the transaction will go through to closing. Sometimes that may mean a month before closing and other times it may mean the day of closing. Every transaction, every staff, and every dentist is different. It’s a gut feeling we get from experience. Consult with your professional.
13. Closing the Sale. Awe, the day is finally here. It’s similar to any major purchase. Some transactions require an escrow company or attorney to handle the closing. Others can be done by a broker. You will sign the purchase and sale agreement, bill of sale, closing certificate, loan documents and other agreements. It’s a pretty painless process.
14. Notifying Patients. As with staff, patients are not notified until the contracts are signed and the money is in the bank. We don’t notify patients as they may leave the practice just as staff may leave. There is a patient letter that is worked and agreed on between the seller and buyer. The cost is typically split 50/50 between the buyer and seller.
15. Post Sale. If the practice is running well, do not make any major changes for 6 to 12 months. The more changes make the staff and patients uncomfortable. Go in keeping things business as usual. Of course, if there is an ugly orange shag carpet with teal painted walls, by all means, bring the decor up to date. Also, if the practice is on a downward trend, you may need to make major changes including letting a staff member or two go, adding procedures, etc. You need to make sure it will be successful and again, your dental professional advisers can help you.
Following these steps will make your acquisition of a practice a smooth process and not a pain in the end (get it?). Because you want to step into your new practice with a smile on your face on your first day and not looking like you just had a colonoscopy.
MedTrust Capital Group guest blogger Rod Johnston has a vast amount of knowledge, experience and education in all aspects of business and real estate that provide an incredible value to every medical practice. He has managed, owned, partnered and consulted with numerous practices throughout the Northwest over the past decade. All have benefited from Rod’s experience in staff management, accounting, marketing, and practice management. Prior to Omni, Rod spent 15 years as Director of Treasury and also Director of Accounting for AT&T Wireless.
Rod is a licensed commercial broker in Washington, Oregon and Arizona and specializes in commercial real estate. He has an MBA from Seattle University, is a Certified Management Accounting, and is a member of the Institute of Business Appraisers and the National Association of Practice Brokers.
Read and print this all new informational PDF from MedTrust Capital Group detailing the new SBA rules and if they will affect your healthcare practice acquisition:
What are the differences between SBA vs. conventional loan products?
At MedTrust Capital Group, we provide the type of financing that will work for your practice’s bottom line. We can help you decide on SBA vs. conventional loans and we work to find the programs that will save you money, or help you expand securely.
Many independent healthcare practices take advantage of SBA loans. The Small Business Administration (SBA) operates several loan programs for startup and advanced-stage businesses. The first thing to know is that you don’t usually apply directly to the SBA for a loan, but to a local bank or lender that participates in the SBA loan program. Some of these loans provide long-term financing for ambitious real estate or manufacturing expansion programs, while others help business owners buy franchise outlets or start new businesses. The SBA requires its partner lenders to adhere to strict underwriting guidelines, so SBA-backed loans are not “easy money,” but they can be a great option for healthcare providers, especially those who want to own their own building.
SBA loans have a bad reputation for being paperwork-heavy and taking a long time. This if often the case with inexperienced lenders. MedTrust Capital Group’s 20 year history of financing ensures the complicated SBA process almost always goes smoothly.
Conventional loans have competitive rates and terms that vary much more than SBA loans. Conventional lending standards are similar to SBA standards, but can require less paperwork (although not that much less). Conventional loans may charge higher fees and can require more down payment, but can offer much shorter term periods and sometimes lower monthly payments. MedTrust Capital Group specializes in analyzing a healthcare practice’s debt structure and accurately determining if an SBA loan or a conventional loan or a mix of the two will be the right financial decision for your practice.
MedTrust Capital Group provides 0 Down Commercial Real Estate Financing for Healthcare Professionals of All Specialties
MedTrust Capital Group provides financing solutions specific to the healthcare professionals of all specialties.
MedTrust Capital Group offers flexible solutions that cater to the specific needs of your project. Not only do we understand your industry, we are not bound by strict guidelines, low Loan-To-Value Ratios, or bureaucracy.
MedTrust Capital Group offers zero-money down commercial estate loans to owners occupying at least 51% of the building. Contact us to learn more.
Dental Practice Expansion Financing
Are you considering a dental practice expansion? Technology is pushing the dental industry into uncharted territory. Don’t get left behind. Dental practice expansion can be done in many ways. A dental practice can get more visibility through a more favorable location. It can add space for increased capacity. It can purchase new equipment to provide new services. But how do you know if your practice is ready for expansion?
Most bankers and business managers would have you ask yourself these questions:
- Are you creating positive cash flow?
- Do you want to move to another part of town, one that provides better visibility and helps grow your client base?
- Are you outgrowing your current space?
- Do you want to add more technology?
Two or more yes answers mean your dental practice is ready for expansion. And if the practice is choosing to expand, it will likely need to secure dental office expansion financing. Whether you are relocating, adding a second location, or acquiring a competitor, if your practice can purchase the real estate (with MedTrust Capital, many times with no money down) you will receive great tax benefits, property value, design control, and potential rent income.
Dental practice expansion financing doesn’t just happen with one lender and a single contract. It’s a multi-step process that includes several people to help. You’ll need:
- A lender who has programs specifically for dentists
- A real estate broker who knows the market (if you’re buying)
- Architects and contractors who have experience with dental or medical practices (if you’re building)
- Dental equipment representatives (if you’re buying equipment)
- A CPA and/or financial advisor to walk you through short- and long-term financial implications of owning property
- A business consultant to help you prepare to expand your practice
MedTrust Capital Group is happy to refer from our trusted network if you are seeking someone in any of these roles. Dental practice expansion financing is possible with the help of MedTrust Capital Group and our trusted network.
Buying a pharmacy with zero money down
Buying a pharmacy with zero money down is possible, depending on your income level, credit history, financial strength, amount of assets, and other factors. MedTrust Capital Group provides solutions specific to buying a pharmacy with zero money down.
We analyze the specific needs of your project and come up with flexible lending solutions that meet those needs. MedTrust Capital Group is not bound by stringent guidelines, low Loan-To-Value Ratios, or bureaucracy like a big bank. After a brief phone consultation we can tell you whether you can start planning on buying a pharmacy with zero money down, or if you’ll need a down payment and how much.
MedTrust Capital Group is the transparent financing group. When we can’t help, we put you in touch with the smart groups who can. Buying a pharmacy with zero money down isn’t easy. MedTrust Capital Group can only offer zero-down commercial estate loans to pharmacists that occupy at least 51% of the building they purchase. Zero down financing is not possible for every client. But when it’s possible, a big bank isn’t as likely to tell you.
MedTrust Capital Group has a more diverse range of financial products available for health professionals than a bank– because we only work with health professionals. There are many steps and moving parts when buying a pharmacy. Finance your pharmacy purchase with MedTrust Capital Group.
If you’ve had a hard time getting in touch with us this month it’s because of the tremendous volume of recent healthcare practice financing we’ve accomplished.
First, a $2.9MM loan for a dental practice which ended up saving the practice $21,000 a month. Next, we refinanced a past dental practice client, saving the client some money and keeping their cash flow strong. Past financing clients return to us often and we provide smart, innovative financing solutions. Finally we were referred a client through the Professional Eye Care Associates of America and helped the client’s practice finance over $200,000 for a construction and build-out of new exam rooms.
We can’t help every healthcare professional, but if your professional practice is growing, you’re buying a new practice, starting a new practice, or want to buy real estate for your practice with 0 money down, call us or send a message through our site.