The US healthcare sector is booming, with total health expenditure projected to reach $6.2trillion by 2028.
However, despite this spectacular growth, running a medical practice can be tough – long hours, keeping up with new technologies and the constant need to keep patients satisfied all take their toll. It’s no wonder that many healthcare providers have little time to seek the most efficient forms of financing.
The fact is, there are many ways to fund a growing medical practice, but it takes skill and an awareness of all the options to make the best fiscal choices for your business. What are the best loan products? What should the financing cost? How can you access the deals that give you all you need? It’s a puzzle wrapped in mystery – but worry no more. Read on to discover all you need to know about medical practice loans and how and where to get them.
A medical practice loan is a business loan designed for physicians, dentists and other healthcare providers. Although similar to many other types of business financing, medical practice loans can be tailored to match the unique demands of the healthcare industry, reflecting both the fast-moving nature of the sector, but also recognizing the traditionally strong cashflow and borrowing capacity of many medical providers.
It depends on the kind of medical practice loan you select. Some loans are simple lump sums that practices pay back over time, whereas others may be linked to the organization’s daily or monthly revenues, or are structured like a business credit card, with a revolving borrowing facility the business can draw against when extra funds are needed.
You can use a medical practice loan for almost any legitimate business purpose, including:
There are many types of medical practice loans. Popular choices include:
SBA loans can be obtained from banks, credit unions, nonprofits and online lenders who are part of the Small Business Administration (SBA) lender network. Partially backed by the US Government, SBA loans usually come with much lower interest rates and fees than any other commercial lending. Although there are many types of SBA loan, SBA 7a, and SBA express may suit the needs of medical practice owners best:
This is the most common type of SBA loan, providing up to $5million to qualifying borrowers with repayment terms as long as 25 years. These loans are 85% backed by the US government, which reduces risk for lenders, but meeting the strict rules of eligibility could still be tough for some medical businesses. As well as an approval process that can take several months, healthcare providers will typically need to have been in business for at least four years and have annual revenues over $180,000. Your personal credit score must be at least 680.
SBA express loans are a faster alternative to the standard 7a loan program. Offered by the same pool of lenders, express loans can give medical practices up to $500,000 to support their business and you will usually get a ‘yes/no’ indication within 36 hours of making your application. SBA express loans are only 50% backed by the US Government, so lenders carry more risk. This means interest rates and fees are higher with express loans than their 7a counterparts.
The simplest and most common type of medical practice loan. Typically used for one-off investments where you know exactly how much cash you need. Business property purchases, technology and medical equipment investment, and debt repayment and restructuring activities work well with this kind of loan. You receive a single, lump-sum cash injection and then pay it back in regular instalments over a fixed period of up to 25 years. Collateral may be required.
Functions like a high-value credit card but comes with lower interest rates and fees. Medical practices can withdraw as much as they want when they want from a loan facility up to the limit of their borrowing. Ideal for covering gaps in working capital, or sudden costs or opportunities, a line of credit can give you excellent peace of mind – you have access to funds when you need them, but you only pay interest on the sums that you withdraw. Interest rates are usually fixed, and your medical business may repay on a set or flexible schedule. Collateral may be required.
Equipment loans are an ideal way to buy expensive medical machinery and equipment. Spread the cost over time to take the strain off cashflow. Equipment loans use the assets you’re financing as security, similar to a car loan or a residential mortgage, meaning there is no need for added collateral. Use the equipment as you pay for it while the lender maintains a lien on the machinery. Once you pay the loan back, the lender releases the lien, and you own the equipment outright.
Available for medical practices that accept patient payments by credit and debit card. You borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.
Functions like a merchant cash advance but with higher borrowing limits. Based on the size and regularity of their total revenues, (not just their credit card sales), medical practices may receive a lump sum and pay it back over a short-term schedule, typically by small deductions from their daily sales.
Top tip: Merchant cash advances and revenue-based loans can usually be secured very quickly as qualification rules are less intensive and credit scores are not so critical. This can make them a good solution for new medical practices who may lack the necessary time in business for other types of loan.
Medical practice loans are suitable for:
You can improve your chances of getting qualified for a medical practice loan by preparing in advance. Key tasks to take care of include:
It is common for mistakes to occur on credit reports and incorrect information could have an adverse impact on your loan application. Note that business credit scores are usually graded from 1 to 100 and are different than personal FICO scores. A good business credit score is 80+ and a good FICO score is 680+. Additionally, not all medical organizations will have a business credit score, in which case, the lender will scrutinize your personal credit report. Ensure it is correct. If there are errors, get them fixed before applying for your loan – and be aware that fixing a credit score can take time and there are no ‘fast credit repairs’ despite the many promises from online ‘credit doctors’ who say they can perform miracles for your score.
To qualify for a business loan, medical providers will need to meet the eligibility criteria of the lender they are applying to. These rules will vary from one funding source to another, but the three critical factors are length of time in business, annual revenues, and your personal and/or business credit score. Generally, the longer you’ve been in business, the higher your revenues are and the better your credit score, the better your chances of securing a medical practice loan. However, even if you’re a start-up, and have few revenues and a credit history that’s less than perfect, there may still be options to obtain the funding your organization needs. Simply contact Swoop to confidentially discuss your business borrowing needs with a medical practice financing expert.
Depending on how much you are asking for, lenders may expect a detailed and insightful business plan that explains why you need the funds and what they will do for your healthcare business once you have them. Business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them. If you cannot produce a business plan yourself, it may be worth paying an external service to do this for you.
Lenders like to know they can get their money back if things go wrong. Often this means you must provide security for the loan – collateral – usually in the form of real estate or some other hard asset that the lender can sell to recover their funds if the worst should happen. If you don’t have sufficient collateral yourself, you could ask a cosigner who has real estate or other assets to join the deal. Most lenders will want collateral to the full value of the loan and will usually consider provided assets at less than general market rates – known as the ‘distress value’ – as they may need to sell the assets quickly to recover their funds.
Medical practice loans can be obtained from almost any lender, but loans from banks and credit unions typically come with lower interest rates and stricter rules of approval, whereas loans from online and alternative lenders may cost you more but approval rules are easier. To improve your chances of success, follow these key steps:
Medical practice loan applications can be affected by a number of different factors:
Make sure your application meets the individual loan requirements of the lender you select. Don’t just assume all lenders are the same.
Some loans will work better for your practice than others. Should you go for a term loan or a line of credit? Which loans are cheapest? Which are the fastest to secure? How much collateral will you need to provide? Research all the funding types you may qualify for before settling on your final option.
Once you have your paperwork ready it makes sense to shop around for different loan offers before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of loan deals from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for healthcare providers who have never taken out a business loan before.
Every lender will have their own list of required documents, but most will need to see bank statements (at least 18 months), balance sheet, profit and loss statements, cashflow projections, list of debts, list of assets, customer database, articles of incorporation, business licenses, certificates of good standing, tax returns and more.
Make sure you are within the deadline stipulated by the lender before submitting your application and ensure you have provided all the necessary documents and information they require. Keep in mind that processing times can vary enormously, with some providers – such as the SBA – taking many weeks to arrive at a final decision and disburse their funds.
If you need funds in a hurry, you may be eligible for a fast medical practice loan. Start that process here.
When your loan approval comes through, make sure you read and understand the terms and conditions of the loan you are accepting. If there are any points you are unclear on, go back to the lender for further clarification. Once you sign and return the loan contract your funds should appear in your business bank account within the timeframe set by the lender – anywhere from same day to a couple of weeks.
No matter if you’re seeking your first medical practice loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality medical practice loans from a choice of lenders. Give your healthcare business the financial boost it deserves. Register with Swoop today.
Daire made it happen! There is no doubt that Swoop sped up the process and found lenders that worked to our time scale rather than the other way round
Joint owner, F45 Virginia
Swoop was actually very helpful in helping us get our initial fundraising in place. Swoop was able to connect us with investors, with grant financing options and debt financing options.
Founder, SingleKey
Pedja was amazing. Super supportive, understanding of our needs and wasn't pushy at all. We've been going back and forth with Swoop for over a year inquiring about different financing options and they were patient until we were ready!
F45 Multi-studio owner
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Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.
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