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Don't Let Loan Debt Strangle Your Practice

Greg Freeman, April 3, 2013

Although his practice was running very well, his debt payments-which ­totaled $173,124 a year-were smothering his business and personal life. No matter what he did to improve his office efficiency, he still found himself scrambling each month thanks to this mountain of debt.

The fix? By taking time to analyze the debt and consolidating it into one long-term 15-year loan, Dr. X was able to lower his total debt payment from $14,427 to $3,923 a month. (Not to mention he ­lowered his blood pressure, too.)

"So many physicians lease equipment nowadays, with lasers being the most common, and with leases there are such hefty pre-payment penalties that these poor doctors are paying every cent of interest on this equipment," Biro says. "We come in and offer them a loan instead of a lease that provides flexibility. When the return on investment is strong on the equipment, which it usually is, the loan allows them to pay it off quickly and save so much over the term of the loan."

Physicians and practice managers often assume that leasing is the only option for obtaining equipment, but Biro says loans are almost always available. Even though a lease might seem more attractive due to a lower monthly payment, being able to pay off a loan early and avoid much of the interest can greatly alter the cost picture.

Biro also encourages physicians to look at the number of loans and leases that are currently held by their practice.

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1 comments on "Don't Let Loan Debt Strangle Your Practice"


Michael J. Parshall (4/3/2013 at 11:14 AM)
While most of Mr. Biro's advice is well taken, I have to differ with his assertion that owning real estate makes a practice more attractive to buyers. In my 20+ yrs experience in practice sales transactions, I have found that sellers that attempt to sell their practice and practice real estate to the same buyer usually find themselves discounting the practice sales price for the following reasons. Real estate values are fairly easily obtained through a search of public records. Medical Practice values are not that easily researched and can differ substantialy depending on the appraiser;the final price is usually the result of negotiations between the sellers and the buyers. Most buyers have limited funds and are primarily interested in purchasing the practice. If the buyer has to buy the real estate, there is very little wiggle room in the price which eats up much of the buyer's funds, leaving the buyer with much less money to pay for the practice which leads to lower practice valuation. Owning practice real estate also confounds practice consolidation and relocation, which are often the buyer's motives. Thus, if the buyer has a choice between two similar practices, one with real estate and one without, the buyer will always save money and have more flexibility in moving the practice by buying the practice without real estate.