Top 4 Loan Programs for Medical Practices
There are numerous loan options for doctors and other medical professionals looking to finance their own medical practices, such as a medical practice line of credit and SBA loans. Selecting the right funding for you and your business depends on the following factors:
- How quickly you need the funds.
- The type of collateral you can provide.
- How fast you can repay a loan.
- The flexibility of the repayment terms.
A good lender will find a loan program that best fits your business’ goals and needs. While there are many options you can apply for, here are three of the most common loans obtained for medical practices:
1. Medical Practice Line of Credit
A medical practice line of credit, also known as a business line of credit, works like a business credit card. Once approved, you can withdraw money from your predetermined credit limit, and you only have to pay for the funds you’ve withdrawn plus the interest. For instance, if you have a $100,000 and you’ve withdrawn $35,000 from it, you only have to repay the $35,000 plus the interest incurred.
This is a viable option if you need funds quickly as you will have access to them as soon as they’re deposited into your business account. A business line of credit also offers flexibility as it can be utilized on an ‘as-needed’ basis. You will still have access to it even if you don’t tap into it for extended periods of time.
2. SBA 7(a) Loans
Among the various SBA loans available, the SBA 7(a) loan is the most popular option for small business owners. You can apply for SBA loans through SBA-approved intermediary lenders, upon which the Small Business Administration guarantees up to 85% of your loan.
Small business owners tend to prefer 7(a) loans because they offer low-interest rates and long repayment terms. They do require proof of a high credit score and stable finances which is why doctors and medical professionals, in particular, are strong candidates when applying for them.
3. Equipment Financing
Equipment financing provides funds that can only be used to purchase equipment. So, if the reason you desire to apply for a business loan is to purchase or update equipment, it’s a strong option for you.
It’s best to use equipment financing for large and expensive items so you can then use them as collateral for the loan. The most common types of equipment being financed are MRI machines, laboratory diagnostic equipment, refrigerator/freezers, and specialized machinery. By using the equipment as collateral, you don’t have to declare any of your personal assets or property. Furthermore, if the equipment you’re going to purchase is of high-value, it can help keep the costs of the loan down.
4. Short-Term Business Loans
A short-term business loan is a type of term loan that offers fast funding for short-term needs. Online lenders typically offer short-term loans since banks aren’t keen on providing fast loans. With repayment terms ranging from three months to five years, short-term loans make it easier for medical practice owners to borrow money and repay it quickly, lowering the total cost of the loan compared to longer-term loans.
Qualifying for short-term business loans from alternative lending companies is relatively faster than getting it from traditional lenders. Online lenders will wire the money to you within days after you’ve been approved. Medical practice owners can use a short-term loan to improve your office, purchase technology or equipment, or pay for unforeseen expenses.
How to Choose the Best Medical Practice Loan for Your Practice
With several options available to you, it can be overwhelming to choose the best loan and the best lender to work with. Unfortunately, there isn’t a one-size-fits-all answer when it comes to choosing a financing solution for your medical practice.
Generally, the best funding option for you should be suitable for your specific needs. You should also choose a lending company that has had experience in funding medical practices. Compare different lending companies and find out which ones give better terms and rates.
Now that you know the different types of medical practice loans available, the next thing you should do is to evaluate your business. This will give you a clear picture of the type of financing you need. Do you want to take out a loan to purchase medical equipment? Do you need to renovate your clinic? Are you looking to hire qualified nurses? Fortunately, medical practices shouldn’t have a hard time finding a good financing solution. This gives you a rare advantage to pick which type of loan has the most favorable terms and rates.