4 Best Financing Solutions for Medical Private Practices
When a medical professional opens his or her doors to a private practice, he or she also becomes an entrepreneur. Just like with any small business, a private practice requires a stable cash flow to operate effectively and eventually grow. If you’re a medical professional seeking outside financing for your practice, a medical practice loan may be a good solution.
Whether you’re planning on renovating your office, purchasing new medical equipment or expanding your practice, there’s a financing resource suitable for just about any business need you may have. Here are four of the best medical practice financing options that medical practitioners can apply for:
- Business Term Loans
Business term loans are a traditional type of financing wherein the business receives a lump sum upfront which they can pay back in increments over a specific period of time – anywhere from a few months to ten years. Private medical practices can put this money towards any business expenses like covering short-term cash flow gaps, buying medical equipment, debt refinancing, renovations or opening another branch. The medical entrepreneur can borrow loan amounts ranging from $5,000 to $2,000,000.
One important thing to note about business term loans is that banks and lenders only offer this financing to businesses with an established and stellar credit background. If your practice is still in its infancy, there’s a good chance your term loan application will be rejected. The lenders may also require their applicants to secure collateral to guarantee the loan. It can be a company asset like medical equipment or personal assets like houses or vehicles if the business is a sole-proprietorship.
- Equipment Financing
Medical practices rely heavily on equipment like MRIs, x-rays, ultrasounds and reliable electronic medical records system, to provide high-quality care to their patients. Without an extra boost on your working capital, the expenses associated with these technologies can be extremely taxing on the company. This is where equipment financing comes in handy.
Equipment financing provides businesses with funding needed specifically to obtain equipment. This gives medical professionals the opportunity to purchase specialized machinery for their private practice without hurting the practice’s cash flow. Once approved, the financing company can finance up to 90% of the equipment, so you the borrower only have to pay for the remaining 10% of the total cost. The best part about equipment financing is that you won’t need additional collateral for the loan as the equipment itself will secure the loan. You simply have to ensure that you can make repayments on time, as a failure to do so will lead the financing company to repossess the equipment.
- SBA 7(a) Loans
SBA loans are among the best loans that any small business can apply for because of their spending flexibility and lenient repayment periods (as long as 25 years). The Small Business Association (SBA) works with intermediary financing companies that grant small businesses, or in this case a medical private practice, with the loan. The SBA guarantees up to 85% of the loan, thus reducing the risk the lenders face in providing small businesses with financing.
With an SBA 7(a) loan, private practices can borrow up to $5,000,000 which they can put towards long-term business investments like buying land for business expansion, acquiring another business or obtaining expensive medical equipment. While other businesses may have a hard time qualifying for SBA 7(a) loans, the strong borrowing history and steady income of physicians make them a strong candidate for this type of financing.
Medical professionals looking for quick access to cash, may find that this is not the best financing option. Even if you are a highly qualified candidate for the loan, the standard timeline for SBA loans could take 6 weeks to 6 months because the application requires a great deal of paperwork to be submitted. This could include personal and business bank statements, profit and loss statements, a business lease, and more.
- Business Line of Credit
A business line of credit is a viable financing option for short-term business needs, like covering temporary cash-flow gaps, payroll or day-to-day business expenses. The financing works a lot like a business credit card. The lender sets a credit limit based on your private practice’s cash flow and credit background. You are only responsible for paying back the amount you’ve used, plus the interest. Since it’s a revolving credit, the credit used is restored for use as soon as it’s paid back.
With a business line of credit, you can have a credit limit ranging from $1,000 to $100,000. Lenders typically don’t require businesses with a smaller credit limit to present collateral. However, those in the higher credit limit range may need to present additional collateral as security for the loan. Depending on the lender, they may require that your practice be in operation for at least six months before your application can be considered.
Handle the Finances of a Medical Private Practice With Ease
Handling the finances of a medical private practice can be daunting, but obtaining a medical practice loan can certainly make it easier. Fortunately, doctors and other medical professionals make great candidates for such loans as they typically have high and stable incomes.
If you’re planning on applying for a medical practice loan, be sure to do your research. Determine what your specific needs are, as well as your repayment capabilities, so you can properly identify which financing option is best for you. You want to be as prepared as possible by understanding fully what you can expect from each type of financing – how it works, what the loan looks like, how it can be used, what the repayment period(s) look like, etc. As with any financing decision, you want to make sure you do your due diligence.