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Refinancing: a Potential Opportunity to Generate Cash Flow

refinancing your healthcare practice to generate cash flow

If you have existing debt, we are going to let you in on a secret. You may have an opportunity to free up cash for your practice. There is a possibility of increasing your income by taking advantage of potentially lower interest rates if you refinance your practice loan. Here’s how it works:

Whenever Possible, Take Advantage of Lower Interest Rates

For example, perhaps three years ago you received a 10-year loan for $550,000 to remodel, start-up, or purchase your healthcare practice. With an interest rate of 5.95% for 10 years, hypothetically speaking, today your loan would still have a balance of about $417,791.00 with a monthly payment of about $6,093.00.

Refinancing that debt today with a new 10-year term at a lower interest rate of 4.9% could potentially reduce your $6,093.00 monthly payment by $1,681.00 and may result in increased cash flow.

Invest in Equipment that Expands Your Practice

This potentially increased cash flow gives you options to invest in your practice. For example, you could use the additional cash flow as leverage toward new equipment that could help your practice grow through expanded patient services.

For example, paying $1,681.00 per month on a 10-year note at a 4.9% rate provides for a $159,198.00 additional loan amount. By investing in upgrades or new equipment, you may add additional value and income to your practice through increased revenue, decreased expenses, or both.

Leverage IRS Tax Code Section 179

Based on the example above, you have the potential to invest an additional $121,054, or $1,390 per month, in your practice, which may not impact your existing cash flow.

But, it may be possible to further maximize the purchase of your new equipment by taking advantage of the IRS tax code Section 179 incentive. This incentive allows you to write off the equipment purchase in the current tax year and may reduce your expenses associated with the investment. 

On the other hand, you could leverage the Section 179 deduction to purchase even more equipment without adding to your expenses. Always consult your tax advisor or CPA on the best way to optimize your equipment purchase using Section 179.

Now is the time to take another look at your financial obligations. If your debt is 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.

The team at LenDRgroup Consulting cares about the long-term success of your healthcare practice. Whether you need practice financing or business consulting, we can create a customized plan that fits the unique needs of not only your practice, but also your career. 

We bring a lending platform of 300+ dental and healthcare-specific lenders. We built this network with the purpose of helping dentists, veterinarians, and physicians. We want you to achieve your practice ownership dreams while eliminating the usual obstacles associated with practice financing.

To date, we have helped hundreds of healthcare professionals expand and grow their practice. LenDRgroup Consulting recognizes and understands the needs of your business and can provide guidance to help avoid costly mistakes. So, let’s get started. Contact us today for a consultation.