Can student loans affect my ability to establish or purchase a practice?

Special to the FMA from Panacea Financial

If you find yourself wondering whether your student loans will hinder you in becoming the owner of a medical practice or surgery center, you are not alone!

Physicians often carry substantial student debt, averaging around $241,600 at graduation, creating a hefty repayment burden and hesitancy about practice ownership.

While student loans do not prevent practice ownership, they do influence the process of obtaining a loan for starting or purchasing a practice. Student loans affect debt-to-income ratio and credit scores, crucial factors in determining lending eligibility.

Debt-to-income ratio measures the proportion of debt to income, so high monthly student loan payments can elevate this ratio, potentially making a candidate less appealing to lenders. To mitigate this, lowering the monthly student loan payment through options like income-driven repayment plans or refinancing may be considered.

Credit scores, another pivotal factor, can be positively influenced by timely student loan payments but may suffer if payments are missed. Maintaining a strong credit score is vital for favorable lending terms, such as  lower rates and a greater chance of loan approval.

Should I take on more debt to own a practice?
While considering additional debt for practice ownership, it's essential to recognize that student loan debt and practice loans are investments into one's future. As Meredith Jones, DVM, CSLP®, emphasizes in this article, “Student debt doesn’t have to affect your career decisions. No matter how much debt you have, there is a plan out there that is going to work for you.”

Effective management of student loan and practice debt requires a clear business plan and a well thought-out repayment strategy.

How practice ownership could benefit your student loan repayment strategy
Contrary to popular belief, taking on additional debt for practice ownership could expedite student loan repayment. Practice ownership often provides extra cash flow, enabling quicker repayment of student loans and the pursuit of other financial goals such as retirement savings.

Work with the bank built by doctors, for doctors
Navigating the financial challenges of practice ownership is less daunting with lenders who specialize in working with physicians. Panacea Financial, exclusively dedicated to assisting doctors in achieving their financial objectives, offers lending and banking services designed for your needs.

As an FMA member, you can save thousands with exclusive discounts on practice loans, personal loans, and student loan refinancing. Learn more here.