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Don't Let Loan Debt Strangle Your Practice

Greg Freeman, April 3, 2013

"Nine times out of 10 we'll find that any given ­doctor might have five to 10 debt sources they're paying on a monthly basis," Biro says. "I'll look at that and find a way to consolidate those debts and stretch them out a little further with a payment that is much more affordable."

The move to electronic health records is spurring a lot of capital expenditures for hardware and software, Biro notes. Many of the companies providing this equipment will offer a three- to five-year lease, but Biro says your bank probably will offer a 10-year loan that puts you in a better position to pay off the debt without a pre-payment penalty.

Another option to consider is incorporating real ­estate into your practice, Biro says. This is another advantage to opting for a loan instead of a lease-when you decide to sell the practice in 10 or 15 years, you will have real estate attached to that sale in addition to your patient base.

"That's part of a good exit strategy. You put all this blood, sweat, and tears into building the practice, and then you want it to be attractive to someone when you sell," Biro says. "Part of your practice being attractive to a buyer is having no debt and some real estate."

To take advantage of some of these financing ­options, Biro suggests seeking out a lender that specializes in working with the medical community, such as his division at Bank of America.

"Those lenders understand the pulse of the medical community, what they need, and they underwrite differently than small business lenders do," Biro says. "We know how to figure out what will make a doctor have a better cash flow position at the end of the month."

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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.