Starting your own practice is a big step — and from a financial standpoint, one of the most important things to get right early is how you structure your banking and financing.
1. Startup Costs Framing
Make sure to look at the full picture of your startup costs.
“That’s not just equipment and rent — it includes build-out, staffing, systems, and importantly, working capital to keep you running in the early months.”
2. Cash Flow Reality
“One thing many physicians don’t realize is that revenue doesn’t mean cash right away. Because of insurance reimbursements, you could be waiting 30 to 90 days to actually receive payment — so we need to plan ahead for that gap.”
3. Credit & Borrowing Strength
“At this stage, lenders are really underwriting you, not just the practice. So your personal credit, income history, and liquidity are going to drive what kind of financing terms you can get.”
4. Loan Options
“There are a few different ways to structure financing — SBA loans, conventional bank loans, and healthcare-specific programs. Each comes with different benefits around down payments, flexibility, and repayment terms.”
5. Personal Guarantee
“Most loans for a startup practice will require a personal guarantee. So, it’s important you’re comfortable with the level of personal exposure involved.”
6. Importance of Working Capital
“Where we often see challenges is not with equipment financing — it’s with having enough operating cash. We typically recommend planning for at least 6 to 12 months of cushion while the practice ramps up.”
7. Banking Structure
“On the banking side, setting things up properly from day one is key. Separate business accounts, a tax reserve account, and a business credit card — it keeps everything clean and makes managing the practice much easier.”
8. Loan Terms & Covenants
“We also want to pay close attention to loan terms — things like debt service coverage ratios or restrictions on additional borrowing. These can impact your flexibility as the practice grows.”
9. Choosing the Right Bank
Not all banks are the same when it comes to medical practices.
- Working with a lender who understands healthcare — billing cycles, reimbursement timing — can really make a difference in how your financing is structured.
- Work with the bank where your lender is also managing your day-to-day banking relationship.
