Opening a new clinic is exciting and expensive, whether you’re a physician, dentist, chiropractor, or wellness professional. It’s natural to want to move forward right away. But using your personal savings to fund the expansion, even if it seems easier and quicker, is a major risk.
Blurring the line between your business and personal finances can hurt your credit score, weaken your business credit profile, limit your ability to fund other opportunities, and open you up to personal financial liability. You gain more financial flexibility and stability when you separate your finances.
Luckily, you can expand your footprint and protect your personal savings through medical business financing and small business credit. Use the following steps to strategically fund your second healthcare clinic and build long-term financial resilience for your business.
Step 1: Accurately Estimate Your Costs
Before you pursue financing, know how much your expansion will cost. Consider the significant costs like leasing a space and hiring staff, and the dozens of little costs that add up. Think about expenses like:
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- Lease deposits and commercial build-outs
- Building modifications for accessibility or sustainability
- New equipment and technology
- Furniture for waiting areas, exam rooms, doctor offices, and reception desks
- Medical disposables, sanitary products, and office supplies
- Building maintenance, like janitorial or security services
- Licensing and permits for your new address and services
- Increased insurance costs
- Payroll and onboarding for new hires
- Marketing to announce the new clinic
If you already run a clinic, you likely have a ballpark figure for many of these costs. Still, be generous with your estimates. Overestimating your working capital needs protects your personal savings and business launch from surprises.
Step 2: Strengthen Your Business Credit Profile
Qualifying for business financing begins with building a strong company credit profile. All you need to get started is an employee identification number (EIN) and a business bank account. If your clinic already operates under a formal business entity (like an LLC or S-Corp), you should already have those basics. Keep your personal and business accounts completely separate.
Establish a reliable borrowing history once you have opened a business credit profile. Paying your vendors on time and in full is a good start. Consider opening a business credit card or net-30 account with suppliers who report to business credit bureaus. By using credit for regular purchases and reliably paying back the creditors, you could establish a basic credit profile within six to 12 months.
As your business credit strengthens, you can qualify for financing when your company needs funds rather than draining savings or cash reserves. And as your score improves, you’ll become eligible for higher limits, longer repayment windows, and lower interest rates.
Step 3: Fund Your Expansion With Medical Business Financing
With estimated costs and a strong credit profile, you can explore funding options for your new location. Evaluate the following options for your expansion, which often work for healthcare businesses. Choose financing that meets your needs, including your timeline, needed amount, and comfort level.
Working Capital Term Loans
Traditional or online lenders offer lump-sum term loans, usually for significant, one-time expenses. They set the interest rate and the monthly payment amount. You can secure long, medium, or short-term business loans.
Consider a working capital term loan if you need to invest a large amount of money into your building, staff, equipment, or marketing campaign. Approval often depends on business revenue and credit history. If your medical company has a strong credit score, you could secure a low-interest term loan for your second location.
Small Business Administration (SBA) Loans
SBA loans are government-backed term loans with attractive rates, longer repayment terms, and guaranteed funding. But you must match specific qualifications, provide significant documentation, and wait several months to secure funds.
It’s worth investigating whether your medical practice qualifies for SBA 7(a) or SBA Express loans. These financing options will protect your cash flow and fund your growth.
Equipment Financing
Lenders offer equipment loans or leases to help businesses secure necessary equipment. For medical businesses, providers finance therapeutic devices, dental chairs, computer servers, X-ray machines, blood pressure monitors, mobility aids, and more. They fund the purchase, you access and use the machinery and tools, and then you make monthly payments until the end of the terms.
Consider using equipment financing to fund your medical supplies when you need significant capital for the necessary tools. Since the equipment acts as collateral, you can qualify fairly easily and protect your personal assets in case of any difficulties. You may also be able to lease equipment that you may want to upgrade frequently.
Business Lines of Credit
These work like credit cards, but with better terms. You can draw a lump sum from your approved amount, pay interest only on what you use, and draw again later.
Because lenders often require strong finances to extend business lines of credit, it’s best to apply for this option before you’re in trouble. You can use it as a cushion for unexpected costs, bridging cash flow gaps, or funding your clinic expansion in stages.
Step 4: Monitor Your Cash Flow
The early months of a new clinic can feel financially tight as you immediately take on new operating costs while waiting for appointments and payments. Business planning and financial tools make managing cash flow less stressful.
You’ll want to monitor your finances carefully to make wise decisions quickly. Use medical practice management software or a business financial platform to track cash flow automatically. Try to determine when your new location will break even, predict how much revenue you’ll earn from each insurance payer and service, and how long your financing will last at current spending levels.
This information will help you predict financial problems and make changes before you’re in crisis and without touching personal funds.
Step 5: Use Financing to Bridge Cash Flow Gaps
When your numbers show cash flow gaps on the horizon, which is likely during the ramp-up stage for your new practice, you can use financing to get through the tight times. And this time, speed and flexibility are key. You don’t want to wait months for funding when you see problems coming up in days.
You need to pick the right loan product and lender to secure funding in time to bridge cash flow gaps. Some products, like invoice funding, merchant cash advances, business lines of credit, and equipment financing, provide capital within hours or days as a standard practice. For products like working capital term loans, the approval and funding process will be much faster with online, alternative, and fintech lenders than traditional banks.
Consider financing options early in the life of your new healthcare practice. You can secure a business line of credit before your expansion as a cushion for unplanned expenses or use invoice funding within the first months of seeing patients while waiting on insurance payments. Proactive financing helps bridge cash flow gaps and protect your personal reserves.
Long-Term Financial Resilience
You’re beginning a long-term opportunity when you open your next medical clinic. It’s more like launching a space station to orbit for decades rather than blasting off fireworks to enjoy for a few minutes.
The key to longevity and resilience in your expansion is to treat it like a business investment from day one. Separate your finances, protect your personal resources, proactively manage your expenses and capital, and focus on your goals. When you do, you’ll build a solid financial foundation for your medical practice and more growth for the long term.
