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Refinancing: A Potential Opportunity to Generate Cash Flow

By: Wendy Catone

If you have existing debt, you may have a hidden opportunity to free up cash flow in your practice and may even be able to increase your income by taking advantage of lower interest rates, when available, and refinancing your loan. Here's how it works:

Take Advantage of Lower Interest Rates, when available

As an example, let's say you have a 10-year loan for $450,000 that you initiated three years ago to remodel, start-up or purchase your practice. At a rate of 7.75% for 10 years, your loan today would hypothetically have a balance of about $349,275 with a monthly payment of about $5,400.

Refinancing that debt today with a new 10-year term at a lower rate could potentially reduce your $5,400 monthly payment, and may result in increased cash flow and monthly savings.

Invest in Equipment that Expands Your Practice

Consider some options for that cash flow.  For example you might take your additional cash flow and leverage it towards the purchase of new equipment that may help your practice grow through expanded patient services.

For example, a $1,390 monthly payment on a 10-year note at a rate of 6.75% yields a loan of approximately $121,054. Upgrading or adding new equipment may add further income to your practice through increased revenue, decreased expenses, or perhaps both.

Leverage IRS Tax Code Section 179

So based on the above scenario, you have the potential to invest an additional $121,054, or $1,390 per month, in your practice without impacting your existing cash flow.

But you may be able to further maximize your new equipment purchase by taking advantage of the IRS tax code Section 179 incentive, which allows you to write-off the purchase of your equipment in the current tax year and thus further reduce the expenses associated with this investment. Or, you might leverage the Section 179 deduction to increase the amount of equipment you can purchase without adding to your expenses. Be sure to consult with your tax advisor or CPA on how best to optimize your equipment purchase using Section 179.

So take another look at your financial obligations. If you're sitting on debt that's over three years old, you may be missing an opportunity to potentially generate additional cash flow, expand your practice, or increase your income with new services for your patients.

About the Author

Wendy K. Catone is the Florida Business Development Manager for Wells Fargo Practice Finance. She is an experienced consultant and finance professional who has been servicing the financial needs of healthcare practitioners for over 25 years. Ms. Catone speaks at seminars and professional schools throughout the year. With a variety of financial products, Wells Fargo Practice Finance helps dentists start, build, grow, and transition their practices throughout their career. She can be reached at 800-708-0279 or wendy.catone@wellsfargo.com

View all articles by Wendy Catone


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The articles and materials on the Wells Fargo Practice Finance website are provided for general information only and do not constitute, nor are they intended as, a substitute for consultation with accounting, tax, legal or other professional advisors. Wells Fargo makes no representation regarding the articles available in the Strategies for Success Library or the completeness or accuracy of the information contained therein. The articles and the information contained therein may be incomplete, may contain errors or may have become out of date. Wells Fargo makes no commitment, and disclaims any duty, to update any of the articles or materials in the Strategies for Success Library.

The views expressed in the articles are those of the authors alone. They may or may not reflect the views or opinions of Wells Fargo.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

ADA® is a registered trademark of the American Dental Association. ADA Member Advantage is a service mark of the American Dental Association. ADA Member Advantage is a program brought to you by ADA Business Enterprises, Inc., a wholly owned subsidiary of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

ADA® is a registered trademark of the American Dental Association. ADA Member Advantage is a service mark of the American Dental Association. ADA Member Advantage is a program brought to you by ADA Business Enterprises, Inc., a wholly owned subsidiary of the American Dental Association.

All financing is subject to credit approval.

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