Funding Established & Expanding Practices
Established practices have less funding needs than new practices as they are well established and producing ongoing revenue that covers the practice costs and owner’s living expenses. Although profitable over the financial year, these practices still require access to funding as the weekly cash inflows and outflows rarely match. These short-term cash flow mismatches need to be funded.
Established practices require short-term variable funding, so bank overdrafts are the ideal solution. As the practices are established with a track record of profitability banks will normally lend $10,000 – $50,000 to a practice unsecured.
Expanding practices need funding to purchase additional practices and fees. Expanding practices normally use bank finance to fund the practice acquisition. The cash flow generated by the new practice purchase is used to pay down the bank loan over a three to five year period. For sole practitioners and practices with fees of less than $600,000, banks normally require residential property as security for the loans. For larger multi-partner practices (minimum two partners with $1,000,000 fees) the banks will finance practice acquisitions secured just on the practice goodwill.