Expanding your practice or in need of the latest medical equipment? If so, know that a doctor’s loan options are varied. In this guide, we’ll review some of the top medical business loans and provide you with information about physician loan interest rates.
Financing Your Medical Practice for Success
According to a survey by the American Medical Association, approximately 55% of doctors work in physician-owned medical practices. When you own your practice, you’ll inevitably need financing at one point or another. And even if you don’t own your practice, you might need supplemental funding one day too.
Here are a few reasons why you might need to apply for a doctor’s loan:
Open a New Practice Location
Perhaps you’ve been in business in the same location for years. You have an established patient base, but you’d like to continue to grow. You’ve found a location where you know a second practice would thrive. Whether you’d like to purchase a new office space or lease one, there are medical practice funding options out there for you.
Acquire a Practice
You’ve heard that a colleague in your field is retiring, and her wholly-owned practice will need to find a successor. You like the idea of acquiring a practice with existing patients. Plus, the practice has developed a positive reputation in the community throughout the years. This is another scenario in which medical business financing can help.
Purchase Medical Equipment
After attending a prestigious medical conference, you’ve decided you want to invest in the latest imaging technology. You know your patients and your medical practice will benefit, but you’re concerned about how you’ll be able to afford the upgrade. Applying for medical practice financing could provide you with the funding you need to advance your practice and provide optimal healthcare for your patients.
Increase Your Working Capital
Are your reimbursements lagging? Need an influx of cash to be able to stay atop everyday expenses? Use working capital funding to cover short-term needs. If you need help paying bills or staff, this type of medical practice financing could help.
How Much Can My Business Qualify For?
Best Financing and Loan Options for Medical Practices
Loans for medical doctors abound. Whether you want to expand your family practice, renovate your waiting room or buy new exam equipment, there are physician loans for you. Let’s take a look at some of the top financing options and loans for medical professionals.
With equipment financing, the item you buy serves as collateral for your funding. You could use equipment financing to purchase the following:
- Examination tables
- Imaging equipment
- Office computers
- Office printers
- Electronic tablets
Payments might be weekly or monthly. Additionally, repayment terms may extend 1-10 years, depending on the lender and the item’s useful life.
Working Capital Financing
Medical working capital loans are designed to help with operational expenses, such as the following:
- Monthly debt repayment
They’re often used as buffer financing until cash flow increases, such as when accounts receivable are paid. As such, repayment terms often span less than 18 months.
SBA 7a Loan
Another option is a loan insured by the Small Business Administration (SBA). The SBA 7a loan for medical practices and small business owners is one example. Loans can be up to $5 million, and the SBA guarantees a certain percentage of the loan, 75%-85% depending on the loan amount. Repayment terms usually extend to 10 years, though they may extend to 25 years. Interest rates may be fixed or variable.
SBA 7a funds can be used for the following:
- Office renovation
- Building purchase
- Site improvement
- Working capital
The loan may also be used to refinance debt. Interest rates may be fixed or variable. As of November 2019, the maximum variable interest rates for 7a loans ranged from base rate plus 2.25% to base rate plus 4.75%, depending on the loan amount and maturity date. Base rate can refer to one of three rates, one of which is the prime rate. At the close of October 2019, the U.S. prime rate was 4.75%.
SBA Express Loans
While traditional SBA loans can take a few months to get funded, SBA Express loans may be funded in as few as 30 days. Loans are only available up to $350,000, however. Additionally, the SBA only insures 50% of the loan. Therefore, interest rates are higher than their 7a counterpart.
The maximum variable interest rate for SBA Express loans that are $50,000 or less is prime rate plus 6.5. For SBA Express loans exceeding $50,000, the maximum rate is prime plus 4.5.
Lines of Credit
If you’d like access to funds as you need them, consider a business line of credit. Credit lines are usually revolving, meaning as you pay down your debt, your credit line increases accordingly, up to the original credit limit. Depending on your credit history, loan amount and lender, you may be required to provide collateral to secure your funding.
Additionally, the SBA works with lenders to offer a revolving credit line referred to as a working capital CAPLine, with funding amounts that could total $5 million.
Discover Your Best Business Loan Options
Where to Find Physician Loans and Financing
Doctor’s loans are available through banks as well as online lending providers. Let’s take a look at the differences between lenders that offer doctor loans.
While banks generally offer competitive interest rates and loan terms, the application and funding process can be lengthy. To apply for funding, you’ll likely be required to submit the following:
- Tax returns
- Bank statements
- Profit-and-loss statements
- Cash flow statement and projections
A minimum credit score of 650 is typically required, and you may need to offer collateral to secure your loan.
Touted for offering quick, hassle-free approvals, online lenders can provide the funding you need for your medical practice. If you’re looking for a streamlined process to obtain capital and have poor credit and limited time in business, consider online lenders. In exchange, you’ll likely have shorter repayment terms and higher interest rates than you’d find with conventional banks.