Medical Practice Financing

Bridge loans are best used when medical practices need access to immediate funding. It’s also known as a gap loan, swing loan, or interim financing. Medical practitioners usually use this financing plan to obtain funding until they get bigger and more comprehensive healthcare business loans. Unlike traditional lenders, you’ll be able to receive the funds from a bridge loan within 24 to 48 hours. However, the most common use of bridge loans is for new expansion or unexpected expenses.

Other uses for bridge loans include:

• Bulk medical supply discounts
• Transitional financing
• Leasehold improvements
• Hiring Employees
• Repairing or Replacing Equipment

Payment terms for bridge loans can last anywhere from a few months to one year. Other than that, lenders may need to ask for collateral to secure the loan. This way, in case the borrower defaults, the lending company won’t experience too much loss.

From routine procedures to operations, the medical industry heavily relies on equipment. Equipment financing can help you to purchase or lease any type of technical (MRI, X-Ray, Ultrasound) or basic office equipment (computers, phones, tablets, etc.).

Here are other reasons why a medical practice would use equipment financing:

• Refinance existing equipment
• Replace computers and phone systems
• Upgrade customer management systems
• Update outdated equipment

What makes equipment financing a suitable choice for medical entrepreneurs is that the equipment itself serves as the collateral. This means they won’t have to pledge other personal or company assets to secure the loan. This lets them obtain funding without putting other assets at risk.

SBA loan programs for physicians are among the best loans medical practitioners apply for. The SBA guarantees up to 85% of the small business loans for healthcare can have access to bank-rate financing. It’s important to note, though, that the intermediary lenders provide the loan, not the SBA. The most popular, the SBA 7(a), is usually what physicians and other medical professionals apply for because of its low business loan rates, flexible term, and low monthly payments.

Because SBA 7(a) is the most sought-after type of SBA loan, entrepreneurs have to make sure that they have a great credit background before applying. This means that for them to qualify, they must have a strong credit score, stable cash flow, and steady income. Medical specialists, considering how profitable and financially stable they are, most of the time, won’t have a problem getting their applications approved.

A revolving line of credit is another medical practice loan option that every medical practice should have. It works like a business credit card. The lender grants the borrowers a specific amount where they can withdraw funds anytime they need it.

 Since it’s a revolving credit, the borrowers can withdraw the funds again if and when they need them. Unlike loans from traditional banks, you only have to pay for the money you’ve used, plus the interest.

Whether you need to bridge cash flow gaps from slow-paying insurance companies or seize a new business opportunity, a business line of credit can help. Your practice can use a business line of credit to:

Here’s a list of how medical professionals can use SBA loans:

• Purchase medical supplies
• Advertising and marketing
• Day-to-day operating cashflow
• Purchase equipment
• Renovate or expand existing practice
• Standby Capital

You can also use a business line of credit to pay for unexpected costs. This is extremely common among medical businesses. If their equipment breaks down, they can use the funds from their medical practice line of credit to get it fixed. The funds are easily accessible. Even if you don’t use it for a few months, your balance will remain as it is and will stay there until you use the funds again.

The medical industry often takes advantage of high-valued company assets to apply for asset-based loans. Medical practices usually have cash tied up in medical equipment, inventory, and accounts receivables. An asset-based loan can free up capital so you can reinvest it in other aspects of your medical practice.

Asset-based financing is a great alternative if the medical practice has stretched its limit on bank loans or other financing options. It gives them a chance to pledge their assets to obtain cash up-front. It’s also best for companies experiencing rapid growth and need additional capital to keep up with the costs.

Here are some of the ways how to use asset-based loans:

• Increase operating cashflow
• Accelerate payments on insurance receivables
• Lower monthly loan payments
• Purchase new equipment
• Hire new employees
• Refinance medical equipment

The borrowing base for asset-based financing depends on the value of the collateral the business owners pledge. For instance, companies that pledge their accounts receivables can get up to 75%-85% of the total value of their invoices. However, if a business uses equipment as collateral, it can only get up to 50% of its value funded.

Medical practice term loans have repayment terms of one to five years, depending on the agreement you and the lender have come up with. This type of financing has an affordable monthly payment which is perfect for medical practice. Using the funds from a medical practice loans is typically better than using your practice’s cash on hand.

Medical professionals can use term loans to:

• Purchase new equipment
• Leasehold improvements
• Refinance existing loans
• Consolidate debt
• Hire new employees
• Working capital injection
• Refinancing business debt

Medical professionals usually apply for a term loan because of its accessibility and flexibility. While banks typically offer the most favorable dental business loan rates for financing out there, most of them are hesitant when it comes to small business loans for healthcare borrowers. Alternative lenders give entrepreneurs a chance to obtain funds without having to go through the tedious process the banks require. Although alternative financing companies might still require a good credit background, their guidelines are less stricter than those of the banks.

Insurance factoring for medical practices is used to accelerate payments on open receivables. Insurance companies are notorious for slow-paying receivables. This affects the cash flow of medical practices that relies on this insurance. To speed up receivables payment cycles, medical practices can use medical factoring.

By collecting payments on aging receivables there is more cash flow available for:

• Marketing and advertising
• Operating expenses
• Business expansion
• Hiring new employees
• Purchasing bulk medical supplies
• Leasehold improvements

One important thing to note about insurance factoring is that the insurance provider only pays for the net claim. The net claim is the amount that the insurance company will pay for the claim. Most of the time, it may vary from the total amount of the invoice.