Everything Healthcare Professionals Need to Know About Medical Practice Loans
Everything Healthcare Professionals Need to Know About Medical Practice Loans
There are many reasons doctors, dentists, or other medical professionals want to expand their practice. One big reason for the majority is to increase their profits. As a doctor, you might have come across new diagnostic equipment online or want to offer new services to your patients but seem reluctant due to a lack of capital.
Paying from your pocket is out of the question since you don’t want to tap into your personal account, so what’s the next best solution?
Medical business loans provide you with the initial funding resources you need to expand your medical practice quickly. Learn more on how you can apply for one through our detailed guide to medical practice loans.
What is a Medical Practice Loan?
Medical business loans are a specific type of loan designed for medical professionals, i.e., doctors, dentists, chiropractors, and more. The loan is used to help finance the expansion of your medical practice.
This type of loan will often offer you a lower interest rate than you would receive from a traditional loan. The qualifications for these loans are typically based on the health of each individual’s creditworthiness.
How Can You Use Your Medical Practice Loan?
As a medical professional with an already established business, you might have a lot of ideas about expanding your practice. It’s essential to write down and list what’s most crucial to invest in and purchase.
For example, your clinic might need revamping to improve your patients’ experience. Or you might come across a list of new dental practice X-rays machines online. You think of buying one to compete in the market and stay updated with the current technology. Whatever you decide, ensure your investment is reasonable and won’t result in a net loss.
Here are a few reasons to get a medical practice loan:
- Advertise to attract and acquire new customers
- Fund for a merger or a larger/ additional practice space
- Purchase state-of-the-art diagnostic equipment
- Fund salary and benefits packages for new staff members or new partners
- Update administrative equipment
- Fund community outreach events
Are There any Restrictions of Using Medical Practice Loans?
After you receive your medical business loan, generally, no entity will keep track of your spending habits once it enters your business account.
When you start pulling out funds, the IRS will take a peek at your financials if you’re using the funds to pay personal bills and debts like medical school debt. Remember that you’re using this loan for business purposes only since there are strict government business policies on how these funds can be used.
Ensure to keep detailed records of your expenses, including purchase and warranty receipts, for your tax records.
How Do Medical Practice Loans Work?
Generally, commercial lenders provide medical practice business loans. To apply for a loan for medical practice financing, you need to consider several factors:
- When applying, you will have to verify your employment status and the nature in which you operate as an employer or business owner regarding giving services at this location (i.e., general practitioner vs. specialized).
- You should also submit financial information from the medical practice, including records regarding your accounts receivable, accounts payable, outstanding existing loans, cash flow statements, etc.
- You also need to fill out personal financial information to verify the type of medical practice - i.e., practicing medicine alone versus being involved in group medical practices such as surgeries alongside other health care professionals. Or you might be a part of holistically-oriented physicians who might treat their patients through diet counseling rather than drugs.
- Unlike traditional loans from banks, where you have to wait months to hear a positive answer, acquiring a medical practice loan through a commercial lender accelerates access to business loans quickly. Before you know it, your business account will fill with the funds necessary to move your business forward.
Who Funds Medical Practice Loans?
With all the medical professionals wanting to expand and fly solo, there must be a continuous cash flow to support new ventures.
The central bodies that fund these loans are traditional banks, investment clubs, investment firms, or a group of wealthy investors/ philanthropists.
Who Provides Medical Practice Loans?
Various entities offer medical practice loans. As a medical professional, it’s helpful to understand the difference between them and their respective loan terms.
The most well-known lenders are Bank of America Corporation and Small Business Administration (SBA).
Bank of America Corporation is available in all 50 states across the United States. It offers special packages like interest-only payments and offers on medical practice equipment loans.
Bank of America also offers interest rate discounts of preferred rewards for business. Preferred rewards for business is a program only for Small Business, Merill Small Business, and Bank of America small business private clients.
As a small business owner, you can reach out to the Small Business Administration SBA that provides loans for health care. The SBA offers practice loans through third-party lenders like banks. The Small Business Loans Administration has very competitive interest rates, with extended repayment options.
It would help if you had in mind that getting a medical practice loan from SBA can take a while, with the final funding taking up to four months to arrive. If you require immediate financing, such as within a month, an SBA loan won’t seem appropriate for you. SBA loans also have very tight requirements for approval.
How to Apply for an SBA Loan?
Qualifying for an SBA medical practice loan can be challenging, but it is possible. If you’re not new to the medical business market and your credit score is strong, then the chances of getting accepted are high.
Here’s what you need to prepare to apply for an SBA loan:
Gather Your Financial Records and Other Paperwork
Paperwork and documents can differ from one lender to another, but they typically include the following:
- Your personal and business tax returns (for the past two years)
- Balance sheet, Bank, and Income statements
- Current commercial lease agreements
- Relevant business licenses
- Your appropriate business plan and medical practice mission statement
- Resumes of all the partners/officers of your business
- Financial projections
Decide on the Amount of Loan You Need
Medical practice loans, from funding equipment to hiring new employees, are available at your disposal.
Do you want to purchase one piece of equipment or two? Or do you want to hire more staff?
Figure out how much loan you really need and provide the information to your lender. It would be best to tell them how you intend to invest your loan.
Submit Your Application
After you’ve gathered all the required information and determined how much money you’ll need and how you plan on investing it, it’s time to submit the application to the lender.
Remember, you might wait as long as three to four months to hear back from the SBA. Before making promises to patients and staff, consider the long waiting time of getting this type of loan.
What Kind of Terms Can You Expect from Medical Loans?
The lending landscape for medical practices can be a little more daunting than it might first seem. You are likely to face higher interest rates and collateral requirements with some lenders. In contrast, others might offer lower mortgage-like terms or allow you flexibility in how much money is needed upfront (upfront fees).
If you seek an easy way to secure funds, alternative lenders offer smaller loans that don’t require much collateral and have competitive rates of around $150K in size. However, they tend to have higher interest rates than traditional banks or other factors that make them less favorable overall.
Alternative Funding Options with Select Funding
Physicians with a well-established medical office might need financing to grow their practice or upgrade costly equipment. Alternative lenders work best for small businesses that plan to scale their medical practices, which is why we’ve established Select Funding as the leading loan provider in this arena.
Our goal at Select Funding is to provide physicians and medical professionals like you with financial assistance in the form of medical practice loans without the hassles other providers can cause. You can trust our lending experts to guide you every step of the way!