Financing Your New Private Healthcare Practice

Financing the start-up of a new private practice is the biggest hurdle in the whole process, based on my own experience. If you are lucky enough to somehow have a pile of cash available before you start your private healthcare practice, you are golden. You will have less difficulty with almost every other challenge you will face in starting your practice. Maybe you’ve saved diligently and didn’t have to pay for medical school. Maybe you inherited your start-up capital. Perhaps your spouse works and can cover home expenses and healthcare insurance for you while you get going. I wasn’t that lucky. I didn’t own a home when my practice started, and I couldn’t even take a home equity loan. In today’s poor financial environment that probably wouldn’t be a good option for anyone anyway. Even in the best of times I personally would be reluctant to mortgage my home to start a business or practice. There are other options to consider first.

Doctor’s are considered good risks for loans because medical practice is a tried and true business. On one hand doctors can obtain credit perhaps more easily that a business owner trying to start a different kind of new business. On the other hand, doctors are not always seen as the most savvy with money, and will take loans with higher interest rates than they might have otherwise, if they negotiated harder. Bankers and private lenders like to loan to doctors for those reasons, in my opinion.

When I started my practice I took a hospitalist job at a local medical center. I mostly worked a few nights and weekend days, leaving me time to see my patients in my own office during the day. In the beginning my practice was not that busy and I had much flexibility in my schedule. If my patient needed more urgent attention, I could see them in the hospital’s ER or outpatient setting. My employer knew my circumstances and worked with me, as I hoped to have a thriving practice soon and would use the hospital for admissions, testing, etc. I worked just enough hours to get health insurance, adding on hours when my office was quiet to increase my income. Overall, I tried to schedule my patients for four days per week, and always tried to have at least one full day at home with my wife and baby girl.

My parents loaned me a small amount of money to help me get my practice started. I had no savings, using much of my income earned as a resident to pay off family and friend loans taken during my medical school. I was able to secure a decent line of credit for my new practice, in the practice’s name, by giving a personal guarantee. My hospital employer vouched for me and with the hospital’s banking relationship I received the loan. Initially, that line of credit was used only to pay my one employee’s salary. She was my front desk and back office, and I did all the clinical work including taking vital signs, giving shots, etc. I also established a credit card in my new practice’s name, which I used for supplies and smaller expenses like stationary printing, etc. I negotiated a 3 month grace period with my landlord so I had no rent when I started, although I did put down the deposit he required. My medical billing service, which I had outsourced, also agreed to wait to be paid until the insurance companies began to pay me.

I admit that the first six months after I opened my practice’s doors were a little tough and challenging, but once my schedule began to fill I quickly added more staff and managed to pay off all the loans and goodwill advanced to me at the start. Now that was a very satisfying feeling, after feeling a bit stressed at the start!