Physicians Strategies For Success library

Building Your Practice Through Debt Consolidation

by Author Not Available | 08/06/2007 | Financing & Financial Planning , Physicians

Years later you may have borrowed again to realize your dream of owning your own practice. And as your business and professional goals grew, you may have decided to finance the expansion of your practice.

While these are all smart investments, your challenge may now be in managing four loans with high rates and at four different terms.

With today's low interest rates, the answer may be to consolidate your business debt. Consolidating your debt simplifies monthly payments and can save you hundreds and even thousands of dollars per month (see Figure 1), increasing cash flow and freeing up resources that can be reinvested in your business.

By reducing your monthly payments, you can set aside cash on a regular basis to fund practice enhancements. In addition to advantages like increased job satisfaction and improvements in patient care, practice reinvestment also allows you to take advantage of IRS section 179 tax credits. Or, you can use the extra cash flow to fund your retirement account. Your financial consultant can advise you on what’s best for your situation.

If you choose to consolidate, your goals should be to lower your interest rate and your monthly payments without increasing the overall term of your obligations. If debt consolidation seems like a good idea for your practice, here are some important steps:

 
• Most lenders have policies that prevent them from refinancing their own loans, so your best option is to select a new lender to refinance your debt.
   
• When selecting a new financing company, make sure the lender understands your business and can help you develop a loan package that’s right for you and your practice.
   
• Also, choose a lender who does not charge an origination fee or charge for loan closing and heavy documentation fees.
   
• Know your personal credit history before approaching a lender. Even if your credit is good, any increase in credit activity can stall the loan process.
   
• Avoid submitting multiple applications for the loan or applying for additional loans during the approval process. A lender who sees that your credit has been reviewed by four different lenders in two months might see you as a credit risk for two reasons. First, you may have taken on too many obligations. Or, you may have been rejected by four lenders. In either case, the lender is less likely to approve your loan.
   
• Don’t choose an adjustable rate loan.
   
• Don’t opt for a longer term to reduce monthly payments. Depending on the size of the loan, most practice loans should be paid off in 7-10 years. A longer term will only add to your interest expense over the life of the loan.
   
• Have your financial consultant review the loan commitment.

In today’s economy, debt consolidation can result in a significant monthly savings to your business. Invested wisely, those savings can bring great benefits to your practice and, ultimately, your patients.

Wells Fargo Practice Finance offers a Business Refinance Program designed to help you take advantage of the benefits of debt consolidation. The only practice lender endorsed by American Medical Association, Wells Fargo Practice Finance has specialized in the practice financing for more than 20 years and offers an array of flexible financing programs, business-building resources and a skilled team of experts to support you and your practice success.

For more information about refinancing your business term debt, call your Wells Fargo Practice Finance Financing Officer at 800-326-0376.

(Figure 1)

_{Statements of opinion not necessarily endorsed by the American Medical Association, or any of its subsidiaries, counsels, commissions, or agencies.}