5 Types of Medical Practice Business Loans You Must Know About
Medical professionals invest plenty of time, money and effort to become knowledgeable healthcare providers. But critical financial questions remain even after years of education and training. How can I cover my operational costs and pay my employees? How can I acquire or start a new practice? How will I be able to afford new medical testing equipment?
Understanding the importance of medical practice business loans is essential in leading a successful career path. Setting the foundation and finding the right funding options can leave you one step closer to achieving your medical professional goals.
In this blog post, we’ll explore the various funding options tailored to physicians and when it makes the most sense to pursue each type of financing.
What Are Medical Practice Business Loans?
Medical practice business loans offer a specialized type of financing designed to meet the unique needs of physicians and medical specialists. From purchasing new equipment, to hiring staff or even buying another practice, these business loans can go a long way in support of overall growth and development.
By securing additional funding through a business loan, medical professionals can invest in their business and ultimately increase revenue and profitability. Specialized medical financing may be offered by traditional banks, online lenders or other financial institutions with a focus around the healthcare industry. Successful repayment of the loan can also help to improve the medical professional’s credit rating and financial health.
Conventional Bank Loans for Medical Professionals
Certain medical professionals may opt for loans from traditional institutional lenders (i.e., banks), which can certainly be a favorable choice for qualified borrowers. However, obtaining bank loans, regardless of their type, can be a challenging feat. Potential borrowers must possess strong financial track records and high creditworthiness.
Doctors, dentists and other medical professionals in particular may struggle to secure a conventional bank loan due to high medical school debt which impacts personal credit scores. In addition, the nature of certain medical professions with unpredictable schedules and evolving regulations may lead to fluctuations in income, making it difficult for banks to assess the likelihood that the loan will be repaid. Another downside of a conventional bank loans is that the application process can be long and cumbersome. Even after approval is granted, securing loan proceeds can take months.
But what if you do manage to qualify for a conventional bank loan and don’t need the funds immediately? If you think you might get pre-approved for one of these medical practice loans, it can’t hurt to apply since they’re equipped with excellent benefits, such as lower interest rates and longer repayment terms.
However, if a medical practice bank loan isn’t an option, there is no shortage of useful alternatives on the market designed to meet all kinds of financial demands for medical professionals.
Alternative Medical Practice Business Loans
Searching for the right medical practice business loan can seem intimidating. That’s why medical professionals need easy access to a variety of companies and other resources to find the best option for their unique financial situation.
When selecting a physician business loan, keep an eye on key factors like funding speed, repayments flexibility and collateral requirements. Keep your financial future in check by doing a comparison based on advantageous aspects of each type of loan offering so you can make the most informed decision.
Industry professionals agree that taking into consideration important criteria up front will save time and stress down the line. Here is some proper guidance and direction to help you make a well thought-out financial decision that aligns with your medical practice goals.
SBA 7(a) Loans – SBA 7(a) Loans are popular among the medical community due to their generous disbursement of capital (up top $5 million) in addition to low interest rates and lengthy repayment terms, ranging from 10 to 25 years depending on how the proceeds are used. They can be used for a wide variety of needs, ranging from business acquisitions to working capital and even real estate. Approval can be a rather lengthy and documentation heavy process, making fast access to financial assistance less assured than one might expect. These loans may only be obtained through an SBA approved lender.
Unsecured Short Term Loans – Sometimes you may need financing fast so a conventional bank loan or SBA loan won’t be your best option. Fortunately, unsecured short term loans offer a viable selection for medical professionals that need working capital to cover cashflow needs or invest in growth opportunities. The approval process is typically much easier and funds can be accessed within 24 hours in some cases. However, it’s important to keep in mind that short term loans are often equipped with higher costs. Before agreeing to a loan contract, take the time to fully assess the interest rates associated and clearly understand any fees that may be charged by the lender.
Invoice Factoring – Invoicing factoring is a valuable option for medical practices looking to satisfy a need for quick cashflow without taking on new debt. By using this type of financing, businesses are able to leverage their outstanding insurance receivables in exchange for a cash advance to acquire the necessary funds for primary expenses, including payroll , engagement allowance and refurbishing of prospective fund. The lender then assumes responsibility for collecting receivables payments. This type of finance system has proven to be very beneficial particularly when medical practices experience elongated charging cycles or suffer a temporary deferment of insurer settlement delays.
Business Lines of Credit – Unlike short term business loans, lines of credit provide access to funds over a longer period of time, giving medical professionals the flexibility to borrow what is needed when it is needed. Businesses only pay interest on the funds that are drawn. Funds can be used for working capital, equipment, seasonal slows and much more. In contrast, short term business loans are better suited for immediate, one-time funding needs, such as unexpected expenses, and typically have a set repayment schedule.
Equipment Financing – Medical professionals may be faced with needing to purchase costly equipment for their practice. One attractive option for this type of need is equipment financing. By opting for this route, borrowers will benefit from lower interest rates in comparison to investing wholly into the purchase of a single piece of expensive equipment. An additional benefit is that equipment financing allows the ability to pay over an extended period of time instead of using all savings at once. For medical professionals who cannot afford to purchase an item outright and want lower monthly payments due to extended terms offered, equipment financing is a practical choice.
In Closing
Navigating the process of financing a medical practice can be a tricky endeavor. Especially for a busy medical professional. Often times, medical professionals think working with a bank to secure a conventional loan is the best route due to the favorable terms offered. But some businesses might not qualify or have the time to wait to receive funding.
Luckily, there are tailored funding options available to help you achieve your goals. From short term business loans to invoice factoring, there’s plenty of funding specifically tailored for doctors that merit a close look. Prior to taking the leap and applying for the first option you see, make sure to carefully consider all options and consult with a financial professional. Failure to do so could result in dangerously expensive implications down the line.
