Physiotherapy Clinic Loans
Since lenders view the physiotherapy industry as stable it may be easier to get funding.
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Australians are becoming increasingly conscious of their own health. As such, Australians of all ages are embracing allied health services, including physiotherapy. The Australian government has also recognised the the benefits of physiotherapy, particularly for Australia's ageing population. Medicare coverage for physiotherapy has increased over the past decade. Private health insurers have also increased physiotherapy benefits to stay competitive.
The demand for physiotherapy in Australia has never been higher. Are you a physiotherapist looking to open your own practice or purchase an existing one? Read on to find out everything you need to know about loans for physiotherapy practices.
What factors should you consider when buying a physiotherapy practice?
When you're considering going into business on your own as a physiotherapist, the first decision is whether to start your own practice or to purchase an existing practice.
Starting your own physiotherapy practice has the emotional advantage of building something from the ground up. Like other professionals, physiotherapists train for years to achieve their qualifications. Many physiotherapists find the idea of building their own client base and creating a legacy in your own name enticing.
Purchasing an existing physiotherapy practice can be a better financial and professional choice. Established practices come with an existing client base and an element of standing within the community. The practice may have existing ties and referral agreements with the local medical community. In addition, the practice could already be approved to provide private health services.
The start-up costs for each business model can vary, and there is no set rule about which involves the greater initial outlay. Starting your own practice will incur costs for the initial fit-out and equipment purchase. This may not be more than the costs of purchasing an existing practice outright.
If you choose to purchase an established physiotherapy practice, consider the following factors before making an offer.
- Reasons for sale. One of the first questions to ask when considering purchasing any business is why the business is for sale. Sellers will have reasons ready to tell you, but you must do your due diligence to find the "real" reason, if there is one.
- Financial records. Review full financial records for the business over at least the past two years. Have your accountant give their opinion on the financials as well. It is often in these financial records that a hidden reason for sale becomes clear.
- Existing client base. A solid base of existing clients is one of the primary advantages of purchasing an existing physiotherapy practice. Existing clients allow you to start earning an income immediately after taking over the business.
- Existing professional network. Physiotherapy practices rely on referral relationships with local medical practices and sporting organisations.
- Relevant specialisations. Ensure that the practice you're considering purchasing matches your specialisation. If you buy a specialised practice but are not yourself an expert in that specialisation, you will lose clients. Conversely, you will not reach your full income potential if you buy a general physiotherapy practice when you are a trained specialist.
- Current employees. A physiotherapy practice relies on its administrative staff as much as its physiotherapists. Consider how long the current staff have been employed at the practice. Find out whether the staff are willing to maintain their employment after the sale.
- Equipment. Ensure that you and the seller agree about the furniture, equipment and supplies that will form part of the sale, and those that won't.
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What you need to know about finance to purchase a physiotherapy practice.
The financial industry considers physiotherapy a stable industry, secure in the long-term. Added to this are the above-average incomes earned by physiotherapists in Australia. As such, banks and other lenders consider physiotherapists to be prime borrowers, giving benefits that aren't available to other corporate lenders.
Lenders are keen to do business with prime borrowers, and will offer favourable loan terms and other benefits, including:
- The ability to borrow up to 100% of the property value when purchasing practice premises.
- Borrowing power of up to 100% when purchasing a business. This includes equipment and fit-out costs.
- A maximum loan term of up to 25 years.
- Overdraft facilities of up to $100,000.
- Low-doc loan options.
- Low interest rates compared to business loans in other industries.
The key to financing a physiotherapy practice is to look for lenders actively pursuing allied health professionals. This is one instance where it may not pay to stay with the same bank that you typically show loyalty to. Find a lender actively seeking physiotherapy clients and you could secure a zero deposit or low-doc loan with lower than industry-level interest rates and a long loan term.
How do I make sure I qualify?
Loan qualification requirements depend on whether you are starting your own business or purchasing an existing physiotherapy practice.
Starting your own business? You will need:
- A comprehensive accountant-certified business plan
- In-depth cash flow projections for at least the next 12 months
- A marketing plan, including an analysis of local competitors
- Sufficient business management skills and experience, or plans to hire a business manager
Purchasing an existing practice? You will need:
- At least 12 months (but ideally 2 years) of complete audited financial records for the practice, including profit and loss statements
Further requirements for any physiotherapy practice loan:
- Membership of the Australian Health Practitioner Regulation Agency (AHPRA)
- An impressive professional resume including proper qualifications and a solid work history – remember that your new venture's future success relies on your ability to treat your patients, and the bank must be satisfied of this
- Appropriately valued commercial or residential property as security for the loan
- Director's guarantee and fixed and floating charge over the practice's assets as further security
How can I finance the purchase of a physiotherapy practice?
As anyone who has ever compared home loans would know, the big banks and other major lenders in Australia are happy to display their interest rates and policies online. Unfortunately, the same isn't true for commercial property loans. The commercial property loan market is not as regulated as the home loan market. This gives lenders the power to set their own rates and loan terms as they see fit. Conversely, the lack of sets loan terms gives well-placed borrowers more power to negotiate their own terms.
Commercial lenders are not subject to the same legal requirements as home loan lenders to prove that the borrower can afford the loan. However, banks and larger lending institutions are still unlikely to extend credit to a high-risk borrower. If you have unusual financial circumstances, you would benefit from approaching specialist commercial funding and other non-bank lenders. These lenders are more likely look into your circumstances on a case-by-case basis than the big banks.
Trends across Australian lenders suggest that they look favourably on physiotherapy borrowers. If you have a guarantor and a high-value residential property as security, you could borrow up to 100% of the property value. Otherwise, lenders are willing to lend up to 80% of the property value for loans up to $1 million, and up to 70% for loans up to $5 million.
Low-doc and no-doc loans are available but will generally attract a larger deposit. So too will loans to set up a physiotherapy practice under a leasehold arrangement.
Since the banks and other major lenders do not publicise their commercial loan terms and interest rates, consider using a mortgage broker. Mortgage brokers cultivate relationships with key loan officers. This gives brokers valuable insights into the lending criteria and terms of each lender.
Frequently asked questions
Should I specialise in my physiotherapy practice?
Specialist physiotherapists are highly sought after and can charge higher rates than general practices. Play to your strengths and only specialise if you have the requisite training and experience to support your claims. Clients will be happy to pay a premium for specialised physiotherapy services, but these same clients will look elsewhere if they feel you are not as knowledgeable in the specific field as you claim.
Should I hire a business manager?
Running your own physiotherapy practice can make you feel like you spend more time on administrative tasks than providing treatment. Are you interested in the finer points of running a business and providing excellent customer service? If so, invest in a business management course before commencing trading. Otherwise, hire a business manager to take care of the day-to-day administrative and financial tasks. This will give you the freedom to concentrate on providing your professional services.
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