Business Expansion

The 5 Fastest Business Loan Options for Your Medical Practice

Last updated on July 27, 2020

Jacques Famy Jr

In today’s rapidly growing and continually shifting healthcare industry, running a medical practice requires loans and financing options that work best for solving problems promptly. If you aren’t in any rush, then a long-term medical practice loan or a Small Business Administration (SBA) loan, such as the 7(s) Small Loan or SBA Express Loan, will be the best options to explore. However, when time is of the essence, these products might not be the right option for you, because they can take weeks to gain approval for and begin funding your medical practice.

The good news is there are many medical practice business financing products available that can get your medical practice quick, same-day funding.

There are many reasons why a medical practice may need financing quickly. Medical professionals face many challenges daily. Patients are increasingly responsible for a portion of the bill, insurance reimbursement rates are going down, and operating costs are rising, which all impact the cash flow of the practice. Not to mention that medical practices rely on tools, equipment, and technology to get an advantage in the field. Unfortunately, those advantages aren’t cheap and may require a loan. This can put undue pressure on a medical practice and create financial strain.

Most Common Reasons Why Medical Practices Need Money Fast

Cash Flow

There are a lot of moving parts required to operate a medical practice. There are a variety of issues that can impact the cash flow of the practice, like insurance receivables, billing, collections, pressure from large medical groups, and competition. These issues can create payroll cash flow stress that must be handled.  Not making payroll is not an option, so it’s essential to have a business credit facility in place to control the ups and downs of the company and stabilize funds with working capital through a variety of loan options.

Emergencies

Emergencies are defined as “a serious, unexpected, and often dangerous situation requiring immediate action” or “arising from or needed or used in an emergency.” That covers a lot of things, right? Anything from equipment breakdowns, facility repairs, financial theft, collection issues, sudden loss in sales or receivables due to an economic event, a loss of a strategic partnership that affects revenues, and other immediate needs.

Software and Technology Upgrades

Technology and software are essential to a practice operating smoothly. Medical practices use everything from customer relations management systems (CRMs), collections, payroll, medical data collection, equipment integration, and financial software programs, all of which play a vital role in the overall operation. Innovations are always omnipresent, and it’s important to have the business credit facilities available to acquire the best and most efficient necessary technologies.

Accounts Receivable Issues with Medical Insurance

The debt of receivables for insurance companies can build up in a medical practice. Debt consolidation may be necessary to improve the overall cash flow when a cash crunch is starting to occur.

Medical Equipment Repairs & Purchases

Medical equipment plays a vital role in the practice’s processes. When equipment goes down, it needs to be repaired or replaced quickly.  

 

Let’s Explore What Options Are Available When You Need Money Quickly

Below Is a List of the Fastest Options Available to Medical Practices:

Medical Practice Long-Term Fast-Track Business Loans

Long-term business loans are always the most desirable as they offer the most extended terms to repay, typically from 2 to 7 years. Long- term medical practice business loans are a lump sum provided upfront with principal and interest rates that start around 7% with monthly payments. These loans require high credit standards for established practices with at least two years in business. Approval for medical loans such as this one can take up to a week but funding can be processed more quickly.

Benefits of a Long-Term Business Loan:

  • Low rates starting from 6.99%
  • Loan terms from 2 to 7 years
  • Monthly payments
  • Fast and simple process with funding in 2-5 days

Short Term Business Loans

Short-term business loans are term loans that provide a lump sum of money that is repaid over terms of 6 to 18 months. When approved, you get a fixed amount and a fixed amount you have to pay back. The difference is the cost, with a fixed payment automatically deducted from your business bank account monthly, bi-weekly, weekly, or in some cases daily. Limited paperwork is required, and credit requirements are more lenient than that of banks or traditional term loans. If you need cash fast, this medical practice financing option can be an excellent solution for working capital, commercial real estate purchases, renovations, and more.

Benefits of a Short-Term Loan:

  • Personal credit accepted from excellent to poor
  • Lower monthly or annual revenue requirements than those of traditional business loans
  • Fast and simple process with same day to next day funding 

Business Line of Credit

A business line of credit works like a credit card because it is a revolving line of credit. It allows you to draw money out and then repay at any time, only paying principal and interest on your outstanding balance. While it’s not technically under the umbrella of “medical practice loans,” it does provide a financing option for healthcare institutions. Credit lines do have credit limits and are usually renewed annually but can be continuously extended depending on the lender. Both banks and alternative lenders can provide business lines of credit.

Benefits of a Business Line of Credit:

  • Ability to draw money at any time
  • Allows borrowers to spend the money, repay it, and spend it again 
  • Principal and interest rates starting at 5%
  • Lower costs and fees than most other financing products

Equipment Loans

Equipment is a must for the healthcare industry. The medical equipment and machinery needed to operate a practice can be expensive and costly. Equipment financing usually comes in the form of leasing or term loans. The equipment is used as collateral. Decisions are made based on the credit of the business owner and the health of financials.

Benefits of Equipment Financing:

  • Simple 1-page application
  • Limited financial paperwork
  • Repayment terms from 1 to 5 years
  • Monthly payments

Merchant Cash Advance

Merchant cash advances (also known as Future Receivables Purchase and Sale Agreements) provide an upfront lump sum of money to businesses in exchange for a fixed percentage of their future sales. Repayment is typically made daily or weekly. With a merchant cash advance, an ACH payment is auto-deducted from a business bank account, or the percentage is taken out of future credit card sales until the payback obligation is met. Terms are expressed as a future sale, so you are given a fixed amount and then responsible for paying back a higher amount through a fixed percentage of future sales. The difference between the amount given and the amount paid back to complete the agreement is your flat cost. The estimated time to repay is typically 6 to 18 months, but there are no term limits as the repayment is based on future sales.

Benefits of Merchant Cash Advances:

  • Flexible repayment terms attached to future sales
  • Provides funds to business owners with sub-prime credit
  • Payments fluctuate to future sales controlling the margin of profit

Business Credit Cards

Business credit cards work similarly to personal credit cards. They are a revolving line of credit with a limit. Business credit cards require a minimum monthly payment, typically lower than that of a business loan. You are issued a plastic card with an account number that can be used online and in-person for any purchases. You only pay interest based on the current principal.

Benefits of Business Credit Cards:

  • Can be used 24 hours a day, seven days a week 
  • No limitations on use of funds
  • Flexible monthly minimum payments 
  • Principal & Interest rates

Applying for Medical Practice Financing, How to Prepare, and Tips

  • Check your credit report and scores – Understanding your credit will help you communicate better with your business funding originator.
  • Check your financials – Look at your financials, business bank statements, tax returns, recent profit and loss statements, and cash flow statements to gauge your financial health. Know your numbers, whether it is annual sales or most recent monthly sales deposits in your business bank account.
  • Consider the use of the money – Clearly identify the need and the “how much” before speaking with a business funding advisor.
  • Compare medical practice loan qualification requirements – Determine which loans you may have the best odds of being approved for. Make sure your business funding advisor has access to all available products to meet your specific needs.

The Bottom Line

Medical practices face unique challenges to operate.  An owner must ask the important questions before financing. Even when you are in a hurry and need a quick fix – stop and ask, why? What is the use or purpose of funding your business, and why do you need to finance it now? Is the need for capital a short-term problem or long-term problem? Was this a one-time special circumstance emergency or will you need working capital on an ongoing basis? Will the company always require a credit facility to prevent last-minute needs, or is it just the nature of your practice? What challenges does the business have in getting approved (credit issues, bank statements, cash flow issues, time in the industry, financial statement issues, etc.)?

Consider the questions above when choosing a funding solution because the answers to those questions lead to different business funding products. AdvancePoint Capital can assist you through this search easily and painlessly without wasting time or, more importantly, money. Working with AdvancePoint Capital gives you a large marketplace and extensive product line, offering you as many choices as possible. As we always say at AdvancePoint Capital, compare, shop, and you will always save!   

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* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.