There comes a time in every physician’s career when they ask themselves “Do I need to make a change?” This change could mean many things including buying into ownership of your practice, starting your own private practice or selling your private practice. Typically, these choices require assistance from experts in fields other than medicine. There are several places you can turn for this advice but hopefully when the time comes you have established a trusted network of people to help.
When the answer to the above question is “Yes” chances are good that you will need some type of financing assistance. Hopefully this relationship is well established and you have confidence you will find what you are looking for in assistance. There are many options to consider when looking into financing and fortunately many people are here to help.
Let’s say you have the opportunity to purchase shares in your current practice. The funds needed here will be personal so you will need to provide several items of personal financial information to get funding. Banks offer several types of loans that will help so you need to answer several questions to make sure the loan fits your needs. The first is “How do I plan to pay the loan back?” which is quickly followed by “How long do I need to pay this back?” If your practice pays quarterly dividends this may be the best source of repayment therefore you will want to make sure you can make quarterly principal payments so it stays in line with your income. You will also then be able to determine based on the projected dividends how long you will need for repayment. In any borrowing circumstance, there are several important factors to consider, including interest rate, associated fees and your personal preference for the structure of the loan.
If you are deciding to open your own practice there are obviously many questions to consider. The key to making the process smoother and more efficient is for you to be prepared. There are many items that you know you are going to need to get the process started with your banker. You will need to have a business plan put together which describes your practice structure, goals, timeline and other various operational and logistical details. You will also need to provide a pro forma along with cash flow projections that can be used to assess the financial potential and viability of the business. Early conversations with a banker who understands your practice needs can allow for creative or optimal structure in the financing of the practice that helps you achieve your greatest success and valuable peace of mind.
Once you have come prepared to your banker, you will have a variety of options that can be tailor fitted to your personal financial preferences and for the use of funds. Think about the items which may be most important to you. One of the main reasons that many start-up companies fail is due to lack of adequate funds. It is important that your well prepared business plan allows for plenty of cash flow to run your business without financial worry. Being prudent and fiscally responsible is highly important in the process but not accounting for key items can hamper a new business. You may be able to accomplish having a financial security blanket using either a line of credit or asking to take several draws over the first six months or year of the company’s start. If you do this the loans final amount may vary based on your needs.
All in all, there are many choices and many things to consider when making a major change in your medical career. Like with any major decision, we hope you have established your trusted relationships before you need them. A great banker can help make the process as simple and efficient as possible!
From original article in Physicians Bulletin, a publication of the Metro Omaha Medical Society. Written by Matt Senden, Core Bank’s Vice President, Healthcare Banking.