If you’re ready to open your own practice, or buy new equipment for an existing one, one of the first things you will need is to get your financing in place. A business loan can bridge the gap between what you have and what you need. An upfront investment in rooms, gear or new staff will pay off in the long run, but you need access to cash to get you off on the right foot.
Unfortunately, getting that business loan isn’t as easy as plucking a number out of the air and asking your bank for it. Any financial institution will want to see some key documents and plans to help them assess whether you can pay the loan back. Even if you have the capital available to finance your plans, a business loan can smooth out cash flow.
A medical, dental or veterinary professional may get a better deal from a bank versus other business owners. However this will depend on the nature of your practice, your credit history and a variety of other factors. In the eyes of a bank, a doctor, dentist or vet is often considered a low risk, but make sure you prepare these documents in advance.
A good business plan helps the bank assess your suitability for a loan. It should include information on where your practice is located and the type of practice. It should explain why you’ve chosen that location, and detail how much competition you have around you.
It should also explain how you’re going to use the loan. Is it for expanding your capacity? Or updating your equipment? How many extra patients will you be able to see as a result of the change?
A core part of your business plan should be a cash-flow projection. It’s worth preparing this with your accountant to make sure you get it right. The bank will want to see that you have calculated your ability to pay the loan back, and have a plan to do so.
The great thing about preparing a solid business plan is it gives you confidence in what you’re doing as well. It’s an opportunity to step back and look at your business, rather than just running it day-to-day.
A financial statement will show the lender your current assets, liabilities and net worth of your business. If you’re starting out, you’ll need to supply personal financial statements which show you can earn money to repay the loan if it all goes pear-shaped.
You may also be asked to show your two latest tax returns and/or Business Activity Statements (BAS). If you have a trust or a self-managed super fund (SMSF) relating to your practice you may be asked to produce those documents as well.
Also, don’t forget you’ll need identification, your bank will want some proof that you are who you say you are. A passport and a driver's licence may be sufficient, but check with the bank as to what is needed to pass the 100-point ID check.
Depending on how much you’re borrowing and what you want to do with it, you may want to look at other financing options, such as an overdraft facility or a credit card.
With an overdraft, you have access to a line of credit which can provide a safety net for tricky cash-flow situations. Whereas a credit card can offer ways of tracking spending and give you the chance to earn reward points—which lets you celebrate with a holiday when your business takes off.
Looking for a business loan? Learn more about our range of practice finance products specifically designed for medical professionals.
The information contained in this article (Information) is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided. We recommend that you obtain independent financial and tax advice before making any decisions.