When physicians get tired of working for someone else and decide to open their own practice, one of the first hurdles to overcome is to secure financing. A business plan and pro forma can help plan how much funding is needed. It can look at projected expenses and income for the first three years in practice and some banks will require seeing a business plan before giving a loan. Options for financing can vary from a small business (SBA) loan where you need to put some money down to a physician startup loan where you don’t need to put any money down but will need a credit score of about 700 or higher.
Two of the main lenders for new practice startups are Wells Fargo and Bank of America. Huntington Bank is also in this space. Most medical specialties from Cardiology to Urology are eligible for startup financing. According to Tapan Patel, Vice President, Bank of America Practice Solutions in New York, they receive the most inquiries from these four specialties: Dermatology, Anesthesiology (pain management), Internal Medicine, and Optometry. “One of the best products we offer is startup financing,” he says. “At the moment, we’re seeing a good amount of interest from physicians looking to start their own practices.”
Bank of America has been lending to MDs, DOs, and ODs for the past 11 years and to dentists and veterinarians even longer. There’s no particular area of the country where demand is highest, but Patel said there’s definitely more interest in setting up practices in densely populated areas. “Wherever you’ve got population density, physicians are aware they’ll get a significant number of patients.”
On average, for a 1-1.5 doctor practice, doctors will need to borrow about $350,000 for an internal medicine practice to about $450,000 for a dermatology practice, which requires more equipment. A bank can give approval for funding within two weeks along with certain conditions. But a doctor will need to do their own due diligence first and get their ducks in order before a bank will disperse the funds.
Patel’s advice to any physician considering setting up their own practice is to build a proper team around you first: from the real estate agent who finds a location, to the bank who gives the loan, to the attorney or CPA who sets up the business entity, to the credentialing specialist who carries out the credentialing process which can take 6 months.