Medical businesses, whether small or large, often get into challenging financial situations. The medical field comes with significant expenses to support life and good health, which are also very costly. That is why physicians often consider getting healthcare practice loans to keep the operations running.

This article will detail what these loans are, highlight available options for physicians, and give an overview of the situations the loans can help with.

What is a Healthcare Practice Loan?

A healthcare practice loan is a loan designed to offer healthcare professionals or physicians financing. Physicians can use these loans to fund almost any kind of business need. 

Depending on the loan products available, loans offered for healthcare practice can be used to finance a wide range of needs such as starting up a new practice, inventory and equipment purchase, operational costs, acquiring an already established practice, and more. 

The good news is that it is not very difficult for healthcare borrowers to obtain funding. From the perspective of most lenders, physicians possess qualities that make them excellent potential loan candidates; they have a solid potential to earn, a high net worth, and a stable income. 

Physicians who own medical practices and wish to expand typically have a better financial position for healthcare practice loan eligibility.

Types of Healthcare Practice Loans

Physicians have many options for loans to fund their healthcare practices. However, the best fit for everyone depends on their specific needs and what a lender requires or demands.

Before settling on a medical practice loan, a physician must account for these factors;

  • The loan’s purpose
  • The amount required to effectively fund the required need without misuse or inadequacy 
  • The time they need the funds and how quickly a lender can avail them
  • Their income and payment ability 
  • The flexibility of the payments to be made
  • Lender requirements like provision of collateral, documentation, credit score, etc.

While there are many loan products to choose from, each has its pros and cons. They are detailed alongside each loan type below for physicians to find the best match for their healthcare financing needs.

SBA Loans

Generally, SBA loans are top among the best loan alternatives, if not the best. The SBA funds physicians through third-party or intermediary lenders. SBA loans are highly sought since they have excellent terms and use-case flexibility. 

They typically come with low-interest rates and have long repayment periods, even for high capital amounts. However, the application process and capital access may take too long and requires a lot of paperwork. They also need a strong credit score from borrowers. 

Term Loans

Physicians can access term loans, which are typically equivalent to traditional business loans. These loans give physicians a lumpsum they must repay over a set term with interest. Usually, online lending platforms or alternative lenders that deal exclusively with healthcare professionals offer these loans for small businesses. However, traditional banks can also provide them for established businesses. 

These loans may be expensive to borrow and tricky for small healthcare businesses.

Equipment Loans

Physicians who need funding for the sole intention of buying or updating tools, equipment, machines, or gear can directly seek equipment financing. The equipment to be funded serves as collateral, so the risk is lower for lenders, negating the need for personal property as collateral. These loans are easier to qualify for, and once the loan is cleared, physicians get to own the equipment. Some lenders may require a down payment, and quickly outdated or hyper-specific medical equipment can make the loans have high-interest rates.

Merchant Cash Advances (MCAS)

MCAs are loan options that provide physicians with cash advances in exchange for a percentage of their ventures’ future debit or credit card sales which may be retrieved daily or weekly until the amount is paid fully. 

MCAs avail funds faster, but they also have high rates. However, they come with significantly streamlined application processes, and the lending requirements are often flexible. They are ideal for physicians seeking smaller loans and shorter terms and those needing immediate funding or access to working capital.

For physicians under financial strain, a debt relief service could offer a more adaptable solution, tailoring assistance to meet the unique challenges of medical professionals without the steep costs associated with MCAs.

Business Lines of Credit

A business line of credit works more like a credit card, whereby a lender approves a certain set amount of credit. Interest only accrues on the funds borrowed, and the funds are easy to access once the line of credit is established. 

This option is ideal for its cost-effectiveness and flexibility and best suits physicians with fluctuating expenses. It is, however, not a good choice for a one-off investment, and some hidden fees and extra charges can build up.

Practice Acquisition Loans

These are specific loans and help physicians acquire other established practices and purchase shares of an already established practice or a partnership. They are best for those with solid financial histories and start-ups who want to buy another medical business. They will often require collateral or a personal guarantee.

Final Thoughts

Physicians with small and big practices now know the best medical practice loans available on the market. They only need to evaluate their business situation or needs, conduct lender research, and make comparisons, then proceed with an application if required.

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