Healthcare Practice Financing: How to Find the Best Funding Partner

Finding the right type of funding for your healthcare practice means you’ll have the support you need as your practice evolves. A banking partner with healthcare financing experience is a good resource to help you select and secure the best type of funding for your practice.

Rising costs and slow collections in healthcare practices make funding increasingly important. Ben Foltz, Vice President and Credit Products Manager in Citizens Bank’s Healthcare Banking group, shares his expertise here to explain how to find the right funding and partner.

Use his insights from years in healthcare financing to help with this important process.

Q. What can healthcare practice financing be used for?

Healthcare professionals typically turn to financing to start, acquire, or expand a healthcare practice, or for debt consolidation and commercial real estate purchases. Foltz notes that common healthcare practice financing scenarios include:

• Practice acquisitions
• Equipment financing
• Partner buy-ins or buyouts
• Real estate purchases and refinancing
• Cash flow support
• Business growth or operations financing
• Practice expansion and relocations
• Dental startups
• DSO financing

Q. How should a practice owner choose a source of financing?

Working with a lender who understands healthcare practices can help you find the best type of funding. For example, many practice owners regularly need support while waiting for receivables. “It can take time for receivables to start flowing smoothly when practitioners first start, and even mature practices can face cash flow crunches,” Foltz explains. Practice owners regularly use revolving lines of credit (LOCs) to manage cash flow and to cover the ongoing costs of operating a practice.

When it’s time to buy expensive equipment, make leasehold improvements, or purchase multiple assets, term loans may make more sense. “Business and equipment loans provide security by giving a commitment of funds up front — before the practice needs to make a large purchase or investment,” Foltz clarifies. “These loans typically have set borrowing limits and repayment terms.”

Q. Are there situations in which financing for a practice is not available?

This capital-intensive industry offers many opportunities for financing. If you’re in doubt about the ability to borrow for a specific need, speak with your lender. “Our Healthcare Specialists look at each request individually and in detail. This ensures that both the customer and our team arrive at the best financing solution,” Foltz says.

Q. How long is the financing application and approval process?

The details of financing vary with each transaction, so it’s difficult to generalize, but Foltz describes the steps a practice owner can take to speed up the process:

• Anticipate the information your financial institution will require. Typically, this will include business and personal tax returns, financial statements, and information about existing debt. If you’re acquiring an existing practice, gather that business’s financial information as well.
• Work with a bank that has healthcare expertise. A specialist who knows the industry can grasp the details of your situation and connect you with the right financing quickly.

Q. How does existing debt factor into lending decisions?

Foltz notes that if the financial institution you’re working with has experience in healthcare financing, they’ll be well positioned to understand the expenses associated with a practice. Most lenders are likely to consider the following factors when reviewing applications:

• The strength of the practice being established or acquired: Can the practice support the debt that’s being taken on?
• The borrower’s personal credit: It’s a good idea to work with your CPA to create a personal financial statement before you apply to ensure that your personal credit profile is strong.
• Financial details: Work with your team of advisors to address issues that may raise concerns.

Q. What questions should borrowers ask potential lenders?

Foltz suggests looking at your relationship with your lender as a long-term partnership and asking questions to ensure that your lender feels the same way. Investigate the following topics to find the right match:

• Find out if your lender has a dedicated healthcare banking team and how long the specialty has been in place. A long track record suggests commitment to healthcare lending, making it more likely that the lender can understand and support your practice in years to come.
• Ask potential lenders about the personal banking benefits they offer. “Look for a lender who can extend support to your personal needs with solutions like residential mortgages, personal lending, student loan refinancing, and wealth management services,” Foltz explains.

Made ready for tomorrow

Choosing the right financing partner for your healthcare practice and preparing in advance will help your practice find the best financing solution. A successful partnership with the right lender can support your goals now and as your practice evolves. If you'd like to discuss your practice’s needs, call 1-800-428-7463 to schedule a consultation with your Healthcare Specialist. Want to see how much you might be able to finance? Try our loan calculator.