Finance considerations of starting a practice – from scratch or buy-in

For many doctors, owning a stake in a practice is a rite of passage. It’s also a big financial commitment, but Avant’s experienced team of medical finance specialists can help provide funding solutions whether you’re starting from scratch or buying into an existing practice.

Medical practice receptionJeremy Stagg, Head of Avant Financial Services SA and WA, has extensive experience meeting the funding needs of doctors.

He acknowledges that, “Not everyone aspires to own a practice. But for many doctors it is a personal goal that ticks a lot of boxes – from achieving financial efficiencies through to driving personal wealth.”

A doctor’s own skills provide the equity needed

The choice of whether to start a new practice, or transition organically from being an associate to becoming a partner in an established practice, is a very personal one.

The common thread is that doctors can usually borrow up to 100% of the funds needed to achieve their goal.

Jeremy explains, “When it comes to buying a home, lenders want the borrower to provide equity in the form of a deposit or other collateral.”

“The situation is very different when a doctor requires funding to buy into a medical practice or start one from scratch.”

“In this instance, the equity that lenders look for comes in the shape of the extraordinary investment doctors make in their own intellectual property. It is the depth of their professional skills that allows doctors to borrow up to 100% of practice finance needs.”

Jeremy adds that doctors do not need to offer their family home as security for practice funding. “This is a valuable plus as it allows doctors to maintain that important distinction between personal and professional finances,” he notes.

Two different ways of financing a practice

The financing options best-suited to a doctor’s goals will depend on whether they buy into an established practice or launch a brand new practice.

  • Buying into an existing practice

Doctors who buy into an existing practice are essentially paying for a share of the goodwill already built up in the practice.

“In this case, we would generally recommend a goodwill loan,” says Jeremy.

The value of the goodwill itself will depend on a number of variables including how long the practice has been operating, the lease term, and whether an outgoing partner is exiting or remaining in the business.

Jeremy notes, “The Avant team will work closely with a doctor’s accountant and legal adviser, to assess the value of goodwill, and ensure an optimum outcome.”

Growing a practice from scratch

Starting a medical practice from scratch calls for a different type of finance, often with a blend of loans that address different funding needs.

As a guide, finance is typically required for:

“It may sound complex,” says Jeremy, “But this is where Avant adds value.”

“We invest time discussing each doctor’s financing needs, which allows us to identify the most suitable options from Avant’s own range of medical finance products plus those of our lender partners.”

“As we only work with doctors, meeting with Avant is the equivalent of visiting a specialist – it provides the certainty of receiving expert advice built on the foundation of considerable experience.”

For more information on achieving your goal – be it buying into a practice or starting your own practice from scratch, call Avant on 1300 99 22 08, or request a free consultation with one of Avant’s medical finance specialists.

The information in this article does not constitute professional advice and should not be relied upon as such. Persons implementing any recommendations contained in this article must exercise their own independent skill or judgment or seek appropriate professional advice relevant to their own particular circumstances. Information is only current at the date initially published.