Medical Practice Financing

Bridge loans are an ideal solution when medical practices need quick access to funding. Also known as gap loans, swing loans, or interim financing, these loans provide temporary financial support until a more substantial, long-term loan can be secured. One of the key advantages of a bridge loan is the speed—you can often receive funds within 24 to 48 hours, making it a go-to option for urgent needs like unexpected expenses or expansion opportunities.

Here are the common uses of bridge loans:

• Taking advantage of bulk medical supply discounts
• Providing transitional financing during periods of change
• Making leasehold improvements to your practice
• Hiring additional employees to meet growing demand
• Repairing or replacing essential equipment

Bridge loans typically have shorter payment terms, ranging from a few months to a year. While they provide fast access to cash, alternative lenders often require collateral to secure the loan, reducing their risk if the borrower defaults. This makes bridge loans a flexible yet responsible choice for medical practitioners who need immediate funding without long-term commitments.

The medical field depends on a wide range of equipment, from routine check-ups to complex procedures. Equipment financing offers a flexible way to purchase or lease advanced medical technology, such as MRI machines, X-ray systems, ultrasound devices, and essential office tools like computers, phones, and tablets.

Medical practices apply for medical equipment financing to:

• Refinance existing equipment to reduce costs or improve cash flow
• Replace outdated computers and phone systems to enhance office efficiency
• Upgrade customer management systems for better patient care
• Modernize medical equipment to stay competitive and improve patient outcomes

One key advantage of equipment financing is that the equipment itself serves as collateral. This means you don’t have to risk personal or other business assets to secure the loan, allowing you to obtain the funding you need without compromising your financial security.

SBA loan programs are an excellent financing option for medical practitioners. These loans are partially guaranteed by the Small Business Administration (SBA), covering up to 85% of the loan amount, which allows healthcare professionals to access bank-rate financing with lower risk. It’s important to note that while the SBA guarantees the loan, the funds are provided by intermediary lenders.

The SBA 7(a) loan is the most popular choice among physicians and other medical professionals due to its competitive interest rates, flexible terms, and manageable monthly payments. This loan is ideal for various needs, including practice expansion, equipment purchases, and working capital.

It’s ideal for a wide range of needs, including:

• Expanding your practice by opening a new location or adding more services
• Purchasing medical equipment to keep up with the latest advancements
• Boosting working capital to cover day-to-day expenses

However, qualifying can be competitive because the SBA 7(a) loan is highly sought after. To increase your chances of approval, it’s essential to have a strong credit score, stable cash flow, and reliable income. Fortunately, many medical professionals, given their financial stability and the profitability of their practices, often find it easier to meet these criteria and secure the funding they need to grow their practice.

A business line of credit is a flexible financing option every medical practice should consider. It works like a business credit card, giving you access to a set credit limit that you can draw from as needed. The key advantage is that you only pay interest on the amount you use, and once you repay, the funds are available again.

How you can use a business line of credit:

• Purchase medical supplies
• Invest in advertising and marketing
• Manage day-to-day expenses
• Buy or upgrade equipment
• Renovate or expand your practice
• Cover unexpected costs
• This revolving credit line is ideal for covering cash flow gaps, seizing new opportunities, or handling emergencies, offering the flexibility and peace of mind that your practice needs to thrive.

Asset-based loans allow medical practices to leverage their existing assets—equipment, inventory, and accounts receivable—to access needed capital. This financing option is ideal when traditional loans are unavailable, or your practice is growing rapidly and requires additional funds.

By using your assets as collateral, you can quickly unlock cash to support various aspects of your business.

Here’s how to use your asset-based loan:

• Increase working capital
• Speed up insurance receivable payments
• Lower monthly loan payments
• Purchase new equipment
• Hire additional staff
• Refinance existing assets
• The loan amount depends on the collateral’s value, with accounts receivable often securing 75%-85% of their value and equipment around 50%. Asset-based loans offer a practical way to fund your practice's growth and operational needs.

Term loans for medical practices offer repayment terms ranging from one to five years, depending on your agreement with the lender. These loans provide affordable monthly payments, making them an attractive option for managing your practice's financial needs without depleting your cash reserves.

Healthcare professionals often use term loans for:

• Purchasing new equipment
• Making leasehold improvements
• Refinancing existing loans
• Consolidating debt
• Hiring new employees
• Injecting working capital
• Refinancing business debt

Term loans are popular among medical professionals due to their accessibility and flexibility. While traditional banks may offer the best interest rates, they often hesitate to approve small business loans for healthcare providers. In contrast, alternative online lenders provide a more straightforward application process with less stringent requirements, making securing the funds you need more accessible—even if your credit isn't perfect.

Insurance factoring is a valuable tool for medical practices to accelerate payments on outstanding receivables. Insurance companies are often slow to pay, which can strain the cash flow of practices that depend on these payments. Using medical factoring, you can speed up the payment cycle on aging receivables, freeing up cash to reinvest in your existing practice.

With improved cash flow through insurance factoring, your practice can:

• Invest in marketing and advertising
• Cover operating expenses
• Fund business expansion
• Hire additional staff
• Purchase bulk medical supplies
• Make leasehold improvements

It's important to note that with insurance factoring, the payment received is based on the net claim—the amount the insurance company agrees to pay, which may differ from the total invoice amount. This ensures that your own practice has the cash it needs without waiting for slow insurance payouts.