Business loans for startup practice out of residency

[intoxicatedtiger]

I finish residency in 5 months, and I want to start a new practice. I will have approximately $45,000 cash, a credit score of 820, $600/month of med school loans to pay, and no other debt. I have no collateral and I have no one to co-sign a loan. I would like to borrow $250-300K. What are my options and chances of getting a unsecured business loan in today's environment? Are there any banks with special programs or should I just try the major banks with a business plan. Any thoughts would be appreciated. Thank you.

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[eyehope]

There do not seem to many solo guys on here. As someone who is looking to go solo within the next year, here is my advice. From what I've read, most banks know young physicians do not have collateral for loans. Some will be understanding and loan you money, some will not. Some healthcare groups may be more willing to loan to docs.

Five months is not a lot of time to get everything set up for a private practice.

You need to:

1. develop/formulate a business plan to show lenders
2. apply for your full medical license
3. apply for your medicare number after obtaining #2
4. apply for private insurers (there is a central website caqh.org to assist)
5. get credentialed at your local asc/hospital
6. choose an office location

#2-5 can take many months, depending on your state. For me (a US grad with no deficiencies and no felonies), it took nearly 8 months.

Really look into minimizing your upfront costs. Start with one equipped lane. Some local practices may allow you to use some ancillary equipment. Do not get the latest and greatest (and most expensive) stuff at first.

 

[KHE]

I finish residency in 5 months, and I want to start a new practice. I will have approximately $45,000 cash, a credit score of 820, $600/month of med school loans to pay, and no other debt. I have no collateral and I have no one to co-sign a loan. I would like to borrow $250-300K. What are my options and chances of getting a unsecured business loan in today's environment? Are there any banks with special programs or should I just try the major banks with a business plan. Any thoughts would be appreciated. Thank you.

That seems like an awful lot of money. Are you going to open cold as a specialist?

What are you planning on buying/doing with that kind of a loan?

 

[intoxicatedtiger]

Thank you for the replies. As for startup time, I'm looking at a year from now. Planning to do locum tenens, moonlighting, or some odd jobs in between. As for startup costs, I think I will probably need $125K or so for leasing renovations, marketing, buying bare bones equipment, leasing diagnostic equpment, and enough cash to operate for 4 months of operating costs. I would like to have an additional $150K line of credit that I can use as a security blanket and maybe further equipment costs if I can't find a nearby practice, ASC, or hospital that will let me use their slt/yag/argons/fa's.

 

[KHE]

Thank you for the replies. As for startup time, I'm looking at a year from now. Planning to do locum tenens, moonlighting, or some odd jobs in between. As for startup costs, I think I will probably need $125K or so for leasing renovations, marketing, buying bare bones equipment, leasing diagnostic equpment, and enough cash to operate for 4 months of operating costs. I would like to have an additional $150K line of credit that I can use as a security blanket and maybe further equipment costs if I can't find a nearby practice, ASC, or hospital that will let me use their slt/yag/argons/fa's.

So then it sounds like what you're saying is that you want to borrow $125k and have a $150000 line just in case. That's much more reasonable. You should certainly be able to get off the ground easily with $125k and still have some decent working capital left over.

This is a good time to be looking for commercial real estate. So much space is available in so many areas and many landlords are desperate. So are contractors.

 

[orbitsurgMD]

I finish residency in 5 months, and I want to start a new practice. I will have approximately $45,000 cash, a credit score of 820, $600/month of med school loans to pay, and no other debt. I have no collateral and I have no one to co-sign a loan. I would like to borrow $250-300K. What are my options and chances of getting a unsecured business loan in today's environment? Are there any banks with special programs or should I just try the major banks with a business plan. Any thoughts would be appreciated. Thank you.

Hang on to your cash. I think you can do it with what you have, although you might want to think of the equipment as collateral, and the cash as a very liquid collateral as well. I recommend you find an office big enough to get you through the first three years of practice and that will require as little buildout at your expense as possible.

Look to small local banks for loans first. See if you can get interest-only terms at the outset which will reduce your initial operating expense during the time when you will be building up a patient base and waiting for payments.

I launched a solo practice a year and a half ago, cold, and am underway and have been self-sustaining after the fifth month of operations. If you are willing to be an active and very hands-on participant in your practice, it is a very realistic plan, even in this terrible economy. PM me if you have questions.

 

[eyehope]

Hang on to your cash. I think you can do it with what you have, although you might want to think of the equipment as collateral, and the cash as a very liquid collateral as well. I recommend you find an office big enough to get you through the first three years of practice and that will require as little buildout at your expense as possible.

Look to small local banks for loans first. See if you can get interest-only terms at the outset which will reduce your initial operating expense during the time when you will be building up a patient base and waiting for payments.

I launched a solo practice a year and a half ago, cold, and am underway and have been self-sustaining after the fifth month of operations. If you are willing to be an active and very hands-on participant in your practice, it is a very realistic plan, even in this terrible economy. PM me if you have questions.

Your collections exceeded expenses by the fifth month? I am curious to the possibility of starting a solo practice in a saturated market (or perceived saturated market). What do you think about EMR and the 2% bonus for e-prescribing? Is it worth it? The problem is that there is no EMR standard so things may change a lot in 5 or 10 years. But, I think the easiest time to implement an EMR is from the get-go.

 

[eyesupply]

What do you think about EMR and the 2% bonus for e-prescribing? Is it worth it? The problem is that there is no EMR standard so things may change a lot in 5 or 10 years. But, I think the easiest time to implement an EMR is from the get-go.

If you are starting practice and money is tight, EMR is a waste. 2% will not nearly begin to pay for it. If EMR requirements change, you could be screwed because you have no financial cushion. The President is proposing major possible changes, such as eventually requiring EMR to have patient education materials, patient internet access to your records, and steep penalties if you have online access and a hacker breaks in. The President may not have his way but there is much uncertainty.

My guess is to not use EMR at first. If you only have a few patients, you can easily use paper. Then when you convert, you will only have a few patients that are on paper. Many patients don't have chronic problems and old medical records are just to satisfy lawyers. In Pakistan, ophthalmologists record a few findings on a bigger sized index card like visual acuity, IOP, and diagnosis because they just want the most pertinent details of the exam, not a malpractice document.

 

[odieoh]

In Pakistan, ophthalmologists record a few findings on a bigger sized index card like visual acuity, IOP, and diagnosis because they just want the most pertinent details of the exam, not a malpractice document.

In my experience medicare has declined payment on the patients I charted on bigger sized index cards.

 

[orbitsurgMD]

Your collections exceeded expenses by the fifth month?

Yes.

I am curious to the possibility of starting a solo practice in a saturated market (or perceived saturated market). What do you think about EMR and the 2% bonus for e-prescribing? Is it worth it? The problem is that there is no EMR standard so things may change a lot in 5 or 10 years. But, I think the easiest time to implement an EMR is from the get-go.

EMR would be one of the last things you should buy at startup. None of the main developers for ophthalmology EMRs have a certified product yet and the costs are high. If you are doing a startup, the incentives won't amount to much. From a purely business perspective, EHRs offer little for a small practice. In large multi-physician, multi-office settings, the value is potentially greater (avoiding lost charts, multiple practice areas using the records, etc.) but the costs are significantly greater, too.

 

[jpemberton]

what about using a consultant to do the market analysis, proforma, help with set up and guidance on marketing

thanks

 

[orbitsurgMD]

what about using a consultant to do the market analysis, proforma, help with set up and guidance on marketing

thanks

Do that yourself: get population statistics for the county/area, call the local professional associations to find out the size of the optometric community, etc. Hiring a consultant at this point is not likely to be good value for money. Consultants cost a lot of money and really aren't likely to know any of the area you are looking to practice better than you are.

Write your own business plan. You are smart enough to do that.

As for marketing, again, if you are on a limited budget, just how much direction do you need to get the word out about your availability to the community? You will be paying a big hourly rate for someone to tell you fairly obvious things. Go to the hospital staff meetings. Bring your cards.

I would consider a consultant if I saw a downward trend and thought I needed help to reverse it, or if I had a high-budget expansion and needed an optimal launch strategy. Keep in mind though that there is no guarantee a consultant's advice is worth anything. I would definitely ask for several references before I paid any of them good money.

If you are starting out small, a local newspaper ad announcing your practice, maybe an interview from the local health reporter, some block ads in local bulletin boards, or if the cable channel has a local roller ad, letters to all possible providers, business cards, a little talk or personal visit, some free food to those who like to meet and eat, and maybe a website with a catchy URL that you can put on your stationery and business cards. Get some pens or other tchotchkes (fridge magnets, etc) with your practice name, number and web address and pass them around. (One pen order is maybe $300 for 300 count, so be generous.) Oh, and never say no to a referral.

 

[Transition Consultants]

Thank you for the replies. As for startup time, I'm looking at a year from now. Planning to do locum tenens, moonlighting, or some odd jobs in between. As for startup costs, I think I will probably need $125K or so for leasing renovations, marketing, buying bare bones equipment, leasing diagnostic equpment, and enough cash to operate for 4 months of operating costs. I would like to have an additional $150K line of credit that I can use as a security blanket and maybe further equipment costs if I can't find a nearby practice, ASC, or hospital that will let me use their slt/yag/argons/fa's.

In all likelihood you'll need to be licensed for at least 1 year before being considered for a start-up loan. Also, you'll likely need to associate outside of the start-up initially to supplement the income of the start-up. Getting a 300k start-up loan is possible, but it will be very difficult to obtain it in the kind of breakdown you are requesting. In the past we used to be able to get more liberal amounts of working capital but most practice lenders will not float that kind of working capital anymore.

 

[Transition Consultants]

In all likelihood you'll need to be licensed for at least 1 year before being considered for a start-up loan. Also, you'll likely need to associate outside of the start-up initially to supplement the income of the start-up. Getting a 300k start-up loan is possible, but it will be very difficult to obtain it in the kind of breakdown you are requesting. In the past we used to be able to get more liberal amounts of working capital but most practice lenders will not float that kind of working capital anymore.

That being said, we can obtain supplemental line of credit sources in addition the start-up financing. It really depends on how you want to execute the project.

 

[Transition Consultants]

what about using a consultant to do the market analysis, proforma, help with set up and guidance on marketing

thanks

Yes, and start-up candidates also need to recognize that the proforma and market analysis will also be scrutinized by bank underwriters. Fine-tuning the full package is crucial in order to get an approval, and each institution can have its own set of underwriting guidelines.