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Financing your first medical practice? 3 strategic options for every doctor

For ambitious medical practitioners, opening your own practice can be a fulfilling endeavour. It gives you the freedom to define the quality of patient care, assemble your team and be in full control of your clinic’s financial success.

However, it also comes with a multitude of challenges. Getting your medical practice off the ground not only requires a strong business vision but the financial capital to put it into action. Read on as we explore the pros and cons of the various funding models, to help you find the right option for your medical practice.


Financing your business vision: what will it cost?

From your business equipment to employee salaries, there are many considerations to take into account when it comes to medical practice financing. There are also various factors that influence how much it costs to set up your practice, including size, location and speciality.

Here, we delve into the different types of medical practice loans, so you can make the best choice for you practice.


Large financial institutions

Doctors are usually regarded by banks as comparatively low risk with high earning potential, so are often in a good position to acquire loans from large financial institutions. For example, ANZ offer financial solutions tailored specifically to healthcare providers. First, you'll need to develop a robust business plan and rock-solid application to get buy-in for your medical practice.

When assessing your eligibility for a fixed or short-term business loan, the lender will consider factors such as your employment history, savings track record and earnings, as well as your business plan. If your loan is approved, it will be for a specific amount of money and you’ll receive a repayment plan.

What’s in it for you?

One benefit of a traditional bank loan is the high amount of credit available – sometimes up to $50,000 for a short-term loan or up to 100% of the fit-out for a fixed term loan. There are also usually long repayment periods compared to other types of loans. 

Medical practice financing specialists

There are various alternative loan services for practitioners looking for medical practice funding. This includes companies that specialise in loans for medical professionals. Smaller loan operators often claim to have unique industry knowledge that helps them to tailor more effective loans. 

What’s in it for you?

Due to loan limits often being smaller, medical practice financing through alternative loan companies tend to have a fast application process. Some medical finance providers will also tailor monthly loan repayments, so they start low and then rise in line with increasing cash flow.

Investing in an existing medical practice

For practitioners purchasing an existing medical practice, many loan providers can lend up to 100% of the purchase price. Furthermore, there are several options for tailoring the loan, such as:

  • Ability to choose repayment options, as suited to your tax needs and financial situation.
  • Ability to redraw on existing goodwill equity for other needs.
  • Leveraging available services to cover conveyancing and stamp duty.
  • And more.

Pros: The foremost perk of purchasing a medical practice is that all of the business and practice processes are already in place. Your investment goes towards existing locations, equipment and staff. This saves you time fitting out a new location and lets you focus on patients. 

Cons: Investing in a practice means agreements are already in place. It can take time for these contracts to expire before being able to implement updates.


Refinancing and consolidating your loans

If you already have a home loan, student loan or credit card debt, the thought of incurring new debt for your medical practice can be daunting. Refinancing your current loan could be an option and involves applying for a new loan that pays out your existing one. You could also consolidate your existing debt by combining several loans into a single loan.

Pros: Refinancing can be used to help you pay off your loan sooner. It's possible to achieve this if, for example, you secure a cheaper rate than your existing loan, don't extend the new loan term beyond the amount of time left on your current loan, and can make larger than required payments and/or more frequent payments than is required.

You can also refinance to consolidate your loans. This can simplify the process of paying off any debts, since you only have to manage one loan from one financial provider. Consolidating could also save you money if, for example, the new loan offers better terms, lower fees or a reduced interest rate. 

Cons: In order for loan consolidation to be truly effective, it’s important to make additional payments to catch up with the inflated loan. Loan refinancing can also come at a price and fees can add up, so before making any decisions, calculate the cost of your existing loan and compare it with the new one. 


Considerations to keep in mind

Every medical practice will have unique needs, so there’s no one-size fits all solution. As you weigh up the financing options above, you may also consider other key factors that can support your success.

For example, some practice owners choose to start business partnerships with other medical practitioners in order to share the financial requirements and even create a better patient-centred ecosystem of care through a multidisciplinary practice. This comes with its own set of advantages and disadvantages. 

It’s crucial to get expert business, accounting and taxation advice before you make any firm decisions that could impact your future. Also research the many support networks available for small business owners, including education events, mentorship programs and Facebook and LinkedIn groups. By finding the right community for you, you’ll always have the knowledge and support of like-minded professionals to fall back on. 

In any business, the secret to success begins with planning well. By having a clear understanding of the costs that will be involved in setting up your medical centre, you can avoid not-so-pleasant surprises like unexpected expenses further down the track. You’ll also need to consider what tax deductions and other incentives you may be eligible for. The Australian Taxation Business website will be your best resource for investigating what your business can claim back.


Over to you

With the right preparation and support, the financial side of your medical practice can be simplified from day one – freeing your time to focus on what you love to do best: providing quality care for your patients.

Adopting the right approach to your practice operations can position you for long term success. To support practitioners, we’ve created the A-Z guide for you to plan and build smart medical practice finances today.

Clinic to Cloud does not provide tax, legal or accounting advice. This material is for informational purposes only and is not a substitute for independent professional advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. See the Clinic to Cloud Disclaimer for further information.

Ready to transform your medical practice?
Michael Derin
My passion lies in Innovation & Technology and I love building fast growing businesses. I am a Corporate Advisor, Accountant & CEO with over 25 years’ experience across Asia Pacific and across multiple industry sectors. Apart from the numbers, I love to get out on the water with family & friends, take in the natural beauty of the ocean, and try (very badly!) to catch a few fish.
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