A medical practice loan is a type of loan meant to help doctors and specialists get funding.
You can use this funding for various purposes depending on the loan package, including operational costs, inventory or equipment purchases installment loan directly from Ipass, acquiring an existing practice, and beginning a new practice. The good news is that finding a good loan for these individuals shouldn’t be too difficult.
In possible loan candidates, doctors have three attributes that lenders look for: excellent earning potential, high net worth, and consistent income. Doctors who already own a medical practice and want to grow will usually be in a good financial position to qualify for a medical practice loan.
Medical Practice Loans: What They Are and How They Work
Medical practice loans are available in various forms for doctors and specialists. Your greatest fit will be determined by your requirements and those of the lender. When looking for a medical practice loan, think about how quickly you need funds, how quickly you can return the loan, how flexible you need payments to be, and whether you can give any security for the Ipass loan.
While you have various options to pick from, each product has its own set of advantages and disadvantages. We’ll go over them in depth to help you locate the best option for your medical financing need.
7(a) Loans from the Small Business Administration
SBA loans are among the best, if not the best, small company loans available. The US Small Business Administration guarantees up to 85% of these financing packages, which intermediary lenders fund. The 7(a) loan is the most common among the SBA lending programs.
Because of its use-case flexibility and favorable conditions, the SBA 7(a) loan is in high demand. These loans provide the lowest interest rates and the most flexible repayment terms.
On the other hand, SBA 7(a) loans are competitive due to their high demand. A solid borrowing history (i.e., a high credit score) and stable finances are two of the qualities you’ll need to give. However, you can see why doctors are frequently strong choices.
You should also know that the SBA loan application process might take weeks or even months.
Because the SBA loan application requires a lot of paperwork, there can be a lot of back and forth—especially for borrowers who don’t keep track of their finances.
As a result, the SBA 7(a) loan isn’t an excellent medical practice financing option for doctors and specialists that require quick cash. Also keep in mind that an SBA 7(a) loan may not be the ideal option for you if you’re beginning a business for the first time.
The most qualified borrowers have good credit scores and have worked in the industry for a few years.
Disadvantages of SBA 7(a) loans
- Time-consuming application process
- A lengthy underwriting procedure
- Access to capital takes a long time.
Advantages of SBA 7(a) Loans:
- A large quantity of capital is available
- Interest rates are low, and repayment terms are long.
Loans from a traditional bank
Some borrowers opt to take out a loan from a typical financial institution (aka a bank). And, if you’re an eligible borrower, this might be a fantastic option—some banks even have loan programs designed expressly for medical practice funding.
For example, U.S. Bank and Wells Fargo are two banks that specialize in lending to health care professionals, such as doctors, dentists, optometrists, and even veterinarians. They can more accurately assess risk by dealing directly with borrowers in these professions. They consider characteristics that could harm other borrowers, such as student loan debt (which doctors frequently have), credit gaps due to health care employees’ high earning potential, insurance, and the track records of similar former borrowers.
However, any type of bank loan is extremely difficult to obtain. Borrowers must be extremely creditworthy and have a solid financial history. However, suppose you think you could be eligible for one of these medical practice loans. In that case, you should apply—they’re among the most affordable loan options, and applying for one tailored to your industry can only help.
Bank Loans Have a Few Drawbacks
- Difficult to come by
- Doesn’t allow for quick access to funds
Benefits of Bank Loans:
- Relatively low-cost
- Medical professionals will benefit from specialized products.
- Willingness to ignore some blemishes on your credit report, such as student loan debt.
Loans with a set repayment period
You’re probably thinking of a term loan when you think of a standard company loan.
You borrow a big sum from a lender, which you repay over time, with interest, for a defined period.
Like the bank loan options we reviewed, these medical practice term loans are suited to the needs of doctors and experts. Instead of working with a typical bank, this option would include borrowing from an alternative online lender that only works with doctors.
What are the main differences between this loan and a similar bank loan? Mostly, pricing and accessibility. Here’s an example of what we’re talking about:
Alternative lending arose in reaction to small business owners’ increased difficulties obtaining financing from traditional banks, particularly following the financial crisis. The good news is that non-bank, internet lenders have made money available to many borrowers by establishing more flexible qualification rules than traditional banks. However, because those loans are riskier for lenders, they are also more expensive for borrowers.
Furthermore, even if the loan terms are favorable, some medical finance companies establish a high threshold for the clients they select. They may ask that you have been in business for several years, have a strong credit history, and have a high annual revenue.
Term Loans Have a Few Drawbacks:
• Expensive in comparison to bank loans
• Term loans are still difficult to qualify for Pros of Term Loans:
• Qualifications are less severe than for bank loans.
• Application and qualification times are shorter than for bank loans.
• Considerations similar to those of a specialist medical loan
Loans for a Limited Time
Short-term loans are more expensive than SBA loans, bank loans, and non-bank term loans, with higher interest rates and shorter repayment dates.
However, healthcare providers in need of quick cash may be worth the price—especially if you’ve calculated the statistics and determined that your income will allow you to repay this medical practice loan on time.
If you need money immediately, short-term loans might be a good option.
Plus, if you know you make a lot of money and would like not to take on more debt in exchange for a lower interest rate, this could be a suitable option for you.
The ease of application and timeliness of funding for a short-term or medium-term loan may be ideal for your medical business if you’ve been in business long enough. They will help to estimate your monthly cash flow and are confident that you can repay a short-term loan.
Short-Term Loans’ Drawbacks:
• shorter Repayment terms
• The average interest rate is higher.
• Only a small percentage of the time is it, especially for medical providers.
The Benefits of Short-Term Loans:
• Application and funding are completed promptly.
• less stringent Approval criteria
Lines of Credit for Businesses
A business line of credit is distinct from the other medical practice loans we’ve discussed so far in this article.
A business line of credit, unlike a term loan, works more like a company credit card.
A lender permits you to take out a line of credit for a specific amount.
In this case, though, you only pay interest on the money you borrow.
Another significant advantage is that once you’ve secured a business line of credit, the money are readily available.
So it’s there when you need it, even if you don’t use it for months.
Let’s imagine you want to open a $100,000 line of credit for your medical firm.
You just need $10,000 to cover immediate needs in the short term.
This implies you’ll only have to pay interest on $10,000 while keeping the ability to withdraw the remaining $90,000 if necessary.
And, once you’ve paid back the money you borrowed, they replenish the account—this is known as a “revolving” line.
The business line of credit is one of the best medical practice loans for doctors and specialists due to its flexibility and cost-effectiveness, particularly for those who may have variable expenses or need to acquire expensive equipment regularly.
Cons of Business Credit Lines:
• Fees and additional charges can add up quickly.
• Unsuitable for one-time investments
Benefits of Business Credit Lines:
• Quick approval
• Only interest is paid on funds that have been spent.
• flexible Repayment terms
• Easy access to money
Loans for equipment
If you require money for the specific goal of updating or purchasing tools, equipment, or gear, you should look into equipment finance.
These medical practice loans are restricted to the purchase of specific items—you must submit a quote to a lender to receive financing—but they can be useful if you have specific equipment requirements.
Because the equipment is used as security for the loan, equipment loans are ideal for large equipment purchases like an MRI machine.
As a result, the lender’s risk is reduced, and you’re less likely to be required to make a down payment or utilize personal property as security.
If you’re purchasing a high-value piece of equipment, such as medical equipment, this can also help you save money on your loan.
Equipment finance for a medical practice loan serves a very specific purpose, but it is easier to qualify for than bank loans because it is self-secured.
This also means that your other company and personal assets will not be subject to collateralization.
Equipment Loans Have a Few Drawbacks:
• You can only use it to buy things.
• Interest rates on hyper-specialized or fast obsolete equipment will almost certainly be higher.
Advantages of Equipment Loans include:
• Easier to be approved for than a lot of term loans
• In most cases, there is no requirement for extra collateral.
• Rather than leasing, you own the equipment.
How to Choose the Most Appropriate Medical Practice Loan for Your Company
Is it better to work with a standard lender or a lender that specializes in medical practice financing, given all of your options?
There is no one-size-fits-all solution.
In general, the greatest rule of thumb is to obtain the finest medical practice loan for your specific requirements.
However, you should definitely investigate your choices with a lender who specializes in medical practice finance, since there may be various advantages.
However, if you can locate a traditional lender who offers a lower interest rate and a longer payback term, that option is preferable for you.
There’s no reason to pay more for a loan because it’s from a lender specializing in financing medical practices.
Choose the cheapest loan for your company out of those you qualify for.
Now that you’ve learned everything there is to know about the best medical practice loans available, all you have to do is assess your individual business circumstances and begin the application process.
As a doctor or medical specialist, you should have no trouble locating a suitable alternative.
This puts you in the enviable position of being able to select the loan that best suits your needs.