Ray Cox, Managing Director of Medifinance explains why it pays to take a careful look at funding options when undertaking a major project
In business, as in life in general, we are constantly making decisions, both big and small.We never consciously decide to make wrong decisions, but it is only after those decisions have taken effect that they can be judged good or bad.We simply must expect the unexpected and recognise that many variables impact on our lives.Having said that, I believe that it does make sense, where realistically possible, to minimise risk by drawing on experience.
Over the many years that I have worked with the Health Professions, sourcing funding has been relatively straightforward. Banks and lenders have taken the view that they represented a good risk and, as a result, most applications for finance went through 'with a nod'.In the current economic climate this has changed…..not dramatically, but significantly…… andfor major projects particularly, plans need to be seen to have been thoroughly researched, considered and realistic before money is forthcoming.
But I see this as a good thing.It focuses the mind, makes our thinking more diligent and mitigates against our rushing into making hasty decisions.
The point I really want to make is that when 'money is easy' we can fall into the trap of disregarding sensible financial management and the longer-term implications of our decisions.I'll give you an example …..
Recently a client of mine decided to set up his practice and fund both renovation and refurbishment and equipment with a single loan from his bank.He was being offered a good rate and, at face value, it seemed a good deal.However, what he had not taken into account is the shorter life cycle of equipment which would need relatively frequent updating and replacement.I pointed out that a single, consolidated loan would ultimately cost him far more than funding renovations and equipment separately. And we are talking thousands of pounds saved here.
Getting the balance right
No business can grow without taking a degree of risk but taking the time to plan carefully and review the options will be time well spent. So, my advice is always to strike a balance between ambition and caution. I have been fortunate enough to work with clients whose businesses have evolved and developed with considerable success but by the same token I have seen mistakes made that, with a little discretion, could have been avoided. I would never claim to have 'seen it all before', but Medifinance does have an unrivalled depth of experience of the healthcare markets and its funding. This is experience that we are happy to share with clients and potential clients without any commitment on their part. Another quick example demonstrates the value of marrying ambition with experience, taking a moment to step back, and as a result avoiding losses that could have run into hundreds of thousands ...
A long standing and very successful client wanted to expand and extend the existing practice. Concerned about the upheaval and impact on patients the decision was made to set up another practice with a 10-year lease to compensate for a short-term reduction in the existing facilities. I was concerned on three levels. Firstly, the effect on patients, many of whom might resent being selected to attend what was clearly going to be a less well-appointed practice, secondly, of course, the cost of setting up, and thirdly the long-term viability of running two practices.
We discussed these concerns openly and together assessed the pros and cons and the risks involved. In the end, working with the architect and builders, we went back to Plan A, amended the extension project with minimal impact on patients and without taking on the additional costs of setting up another practice.
Particularly if you are considering a major project for your practice, you would be wise to get an early overview of the likely financial, funding and tax implications before you start planning and briefing architects and builders. If you fail to do this a great deal of time can be wasted and unnecessary expense incurred as the project evolves. And as I have pointed out, sourcing the most advantageous funding goes a lot further than simply interest rates.