The 7 Best Business Loans for Medical Practice in 2022

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What Are Medical Practice Loans?

A medical practice loan is business financing for doctors, physicians, medical offices, and specialists within the medical field. This financing can be used for various business purposes, including medical practice acquisition for a new practice, startup costs, existing practice business expansion, equipment, and other operational costs that a small business owner may face.

What Products Can My Medical Practice Qualify For?

From a lender’s perspective, medical practices are a great industry to lend to because of their high success rates, stable growing sector, and low default rate. Because of this fact, there are a variety of products available for financing medical offices, including:

  1. Traditional Small Business Loans
  2. Business Lines of Credit
  3. SBA Loan Programs
  4. Short-Term Small Business Loans
  5. Equipment Term Loans & Leases
  6. Medical Practice Acquisition Loans
  7. Business Credit Cards

7 Best Medical Practice Loans

Evaluate the best medical practice loan that fits your need. Below is a list of the most common medical practice loans broken down by how they work, their loan terms, best uses, and pros and cons for doctors and other healthcare professionals.

Traditional Medical Practice Business Loans

Medical business loans are typically offered by a consortium of banks or a traditional lender. Some lenders exclusively provide medical practice business loans that cater specifically to medical professionals. These lenders have a deep knowledge of the medical business and a history of lending that gives them greater insights into lending to medical practices. Because of this fact, they can offer quite attractive terms and a streamlined process that can get funds to a medical practice within a week.

Qualifications

  • Annual revenue above $500,000
  • Minimum credit score of 680 and above
  • Over three years in business with at least two tax returns filed
  • Profit of $75,000 or more on business tax returns (with depreciation taken into consideration)

Use of Money

  • Equipment for medical office
  • Business debt consolidation
  • Business expansion
  • Operating expenses and inventory
  • Renovations or refurbishing

Terms

  • Loans up to 2 million
  • Loan terms from 2 to 10 years
  • Rates from 5.995 to 15.99%
  • Monthly payments
  • Low origination fees

Pros

  • Great rates, low fees, and overall terms
  • Speed of process (usually takes a week)

Cons

  • High credit standards
  • Financial statements required with strict financial statement standards
  • Time in business requirements
  • Approval rates lower than alternative business loans like short-term business loans and business credit cards

Business Line of Credit

A business line of credit operates differently than a business loan because it is revolving financing, just like a credit card. You can get approved for a business line of credit up to a specific limit and yet not draw the funds upfront like you would have to on a term business loan where you take a lumps sum upfront and repay under fixed terms.

You only pay the financing charge on the current balance and can draw at any time necessary with a business line of credit. Business lines are a desirable option for a healthcare practice because they are cost-effective, provide flexibility, and are great for unexpected expenses or emergencies when operating a medical office.

Qualifications

  • Annual revenue over $250,000
  • Minimum credit score of 680 and above
  • Over three years in business with at least two tax returns filed
  • Financial statements in good standing and showing profits

Use of Money

  • Equipment
  • Debt consolidation
  • Business expansion
  • Operating expenses and inventory
  • Renovations or refurbishing
  • Emergency cash flow

Terms

  • Revolving credit line
  • Terms renewed annually
  • Pay interest rates from 5.99 to 15.99%
  • Monthly payments
  • Low origination and service fees

Pros

  • Great rates, low fees, and revolving terms
  • Flexible
  • Speed of process (days, not weeks)

Cons

  • High credit standards
  • Financial statements required with strict financial statement standards
  • Time in business requirements
  • Approval rates lower than that of alternative business loans like short-term business loans and business credit cards

SBA 7 (a) Loan (Small Business Administration)

SBA loans are business loans administered by the Small Business Administration, which is the agency that sets the guidelines and standards of underwriting for the loan program. SBA is not the lender but guarantees SBA-approved lenders up to 75% of the loan. This is a highly sought-after product due to the low rates and long loan term but does have high standards and requirements and requires a lot of paperwork and time. The effort can take 45 to 60 days for physician loans such as this, so be ready.

Qualifications

  • Annual revenue above $180,000
  • Minimum credit score of 680 and above
  • Over four years in business with at least two tax returns filed

Use of Money

  • Equipment
  • Medical school debt consolidation
  • Business expansion
  • Operating expenses and inventory
  • Renovations or refurbishing

Terms

  • Term loans up to 5 million
  • Term loans from 2 to 10 years (up to 25 years with commercial real estate)
  • Fixed interest rate that starts at prime rate + 2.75% to prime rate + 4.75%
  • Monthly payments
  • Low origination fees

Pros

  • Great rates, low fees, and a term loan

Cons

  • High credit standards and strong credit scores
  • Financial statements required with strict financial statement standards
  • Time in business requirements
  • Long processing times (can take months, not days)
  • Lower approval rates than all other business funding options
  • Commercial real estate may be needed for collateral
  • Require sufficient business plan and use of funds

Short-Term Medical Practice Business Loan

Short-term business loans are an excellent choice when you can’t get approved for traditional medical practice business financing, such as a conventional long-term business loan, business line of credit, or SBA loan. The requirements are a lot less stringent than those mentioned above and open the doors to getting capital when the other medical practice loans say no. But the terms come with shorter terms and higher costs, so medical practices must consider more closely the cost versus benefit of acquiring short-term medical practice loans.

Short-term medical practice financing evaluates credit and cash flow and is less reliant on financials like tax returns and other financial statements; therefore, lenders take on greater risk and charge more under shorter terms. The costs are based on factor rates or fixed costs, which are different from principal and interest rates and usually weekly and sometimes daily payments, with terms from 6 to 18 months. This product is not available from traditional banks and is not considered one of the traditional bank loans. Online lenders are the best source to obtain financing via short-term small business loans. 

Qualifications

  • Annual revenue over $180,000
  • Minimum credit score of 500 and above
  • Over 6 months in business
  • No tax returns or financial statements typically required

Use of Money

  • Equipment
  • Debt consolidation
  • Business expansion
  • Operating expenses and inventory
  • Renovations or refurbishing

Terms

  • Term loans from 6 to 18 months
  • Factor rates from 1.18 to 1.45
  • Weekly or daily (M-F) payments
  • Origination fees

Pros

  • High approval rates
  • Low credit standards
  • Low documentation requirements
  • Speed of process (takes a day or two)
  • Term loan

Cons

  • Higher cost
  • Shorter terms
  • Frequent payments

Medical Equipment Loans

Medical equipment loans are specific purpose loans or leases used to buy medical equipment for a medical practice. The medical equipment purchased is used as collateral for this type of financing. Medical equipment loans and leasing terms are based on interest rates or lease factor rates depending on the product and range from 2 to 10 years in duration. Therefore, terms are more attractive than short-term business loans.

Qualifications

  • Minimum credit score of 680 and above
  • Revenue above $180,000 annually

Use of Money

  • Equipment

Terms

  • Loans up to 2 million
  • Term loans from 2 to 10 years
  • Rates vary
  • Monthly payments
  • Low origination fees

Pros

  • Reasonable rates, low fees, and overall terms
  • Speed of process (takes days, not weeks)
  • Term loan or lease

Cons

  • High credit standards
  • Time in business requirements
  • Approval rates lower than that of alternative business loans like short-term business loans and business credit cards

Medical Practice Loans for Acquisition: How Do You Finance a New Medical Practice?

Medical acquisition business loans are offered by specific lenders who specialize in evaluating medical practices and their purchases. This product is typically provided via a consortium of banks that understand the medical industry and its complexities. The product usually offers low money down from 0 to 25% down depending on the strength of the borrower, with prime terms or treasury plus 1% to 2%, with relatively low origination fees and terms usually up to 15/30 balloon of fixed terms. Not every bank offers medical practice loans to acquire a practice. Still, many larger banks like Bank of America have actual divisions specializing in this type of practice loans for dentists, doctors, and other medical professionals.

Qualifications

  • Experience of the medical practitioner
  • Minimum credit score of 680 and above
  • Asset and collateral requirements

Use of Money

  • Equipment
  • Debt consolidation
  • Business expansion
  • Operating expenses and inventory
  • Renovations or refurbishing

Terms

  • Loans up to 2 million
  • Loan terms from 2 to 10 years
  • Rates from 5.995 to 15.99%
  • Monthly payments
  • Low origination fees

Pros

  • Great rates, low fees, and overall terms
  • Speed of process (usually takes a week)

Cons

  • High credit standards
  • Financial statements required with strict financial statement standards
  • Time in industry
  • Approval rates lower than alternative business loans like short-term business loans and business credit cards

Medical Practice Business Credit Cards

Often not thought about, credit cards are actually the most common form of credit used for medical practices. This revolving credit option allows medical practices to both purchase products and pays for expenses. Although credit limits may be less than with traditional financing and rates may be higher, the flexibility of a business credit card cannot be ignored and is always an excellent product to keep in hand for medical practices.

Qualifications

  • Low revenue requirements
  • Typical minimum credit score of 680 and above; Good credit history needed
  • Based on business owners personal credit

Use of Money

  • Equipment
  • Debt consolidation
  • Business expansion
  • Operating expenses and inventory
  • Renovations or refurbishing
  • Expenses
  • And more

Terms

  • Revolving, open-ended credit card
  • Interest rates from 0% to 29.99%
  • Monthly payments
  • No origination fees, sometimes annual fees

Pros

  • Decent rates, low fees, and overall terms
  • Flexible
  • Speed of process (usually takes a day)

Cons

  • High credit standards
  • Higher rates than traditional loans and lines of credit
  • Approval rates lower than that of alternative business loans like short-term business loans and business credit cards

Selecting the Best Medical Practice Loan for Your Business

Like many small business owners, when trying to determine which medical financing product is best for their practice, a medical professional should always start with the question: what is the use of the money for the medical business? Then, what is the return on the investment or use? Paying for cash flow shortage requirements or issues may give you a different answer than an equipment purchase. The amount of time you have may also influence your choice of medical practice financing, so always ask yourself these questions first.

You must investigate which medical business financing products you qualify for based on your specific stats and qualifications. Although one product may be more beneficial than another, it doesn’t matter if you don’t qualify or get approved for the better product. Therefore, proper investigation and research are required before applying for multiple products to see what is best for you and your medical practice.

Medical Practice Loans: A Final Word

If you have the time, be deliberate and methodical with your search for the best medical practice financing product for your needs. You most likely will need more than one of the medical practice loan products mentioned in this article throughout your medical practice business life. Getting educated now helps you benefit from this knowledge down the road when it’s truly needed.

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