If you’re a medical professional who aspires to start a private practice, you probably know that your savings alone may not be enough to get you there.
You’re likely still paying off hefty student loans.
Additionally, factors like your gender and how in-demand your skillset is can determine what you make as a resident.
That’s where medical practice loans come in: these financial lifelines can help bridge the gap between your savings and the capital needed to launch your practice.
Physicians Thrive discusses what they are, the types you can apply for, the qualification requirements, and more.
Key Takeaways
- Medical practice loans help fund startups, equipment, acquisitions, and operational expenses.
- Loan types include SBA loans, bank loans, lines of credit, and cash advances.
- Eligibility often depends on credit score, collateral, business plan, and documentation.
- Interest rates, fees, and loan terms should guide all borrowing decisions carefully.
Table of Contents
Medical Practice Loans – What They Are, Who They’re For, and Types
A medical practice loan is financing for healthcare professionals.
Doctors, vets, dentists, chiropractors, optometrists, and similar can apply for these loans to use them to:
- Set up shop
- Buy medical equipment
- Purchase a stake in an existing practice
- Acquire real estate for office space; and
- Fund other business-related expenses
Lenders typically tailor these loans based on either the medical specialty they serve or the specific purpose they fund.
For example, you can apply for:
- Dental practice loans
- Veterinary practice loans
- Commercial Real estate loans; and
- Start-up loans
You can also get loans to pay salaries and benefits and meet other operating expenses.
As long as you intend to use the money to start up a new business or manage an existing one, lenders may be willing to provide the capital.
Depending on the type of loan you apply for (more below), approval can take as little as 24 hours or as long as several weeks.
Additionally, the loan type sought determines the repayment term, which can last up to 25 years. Meanwhile, the highest amount you can borrow is $5,000,000.
Types of Medical Practice Loans
Traditional banks, government agencies working with them, and online lenders typically offer the following lending options:
Bank Loan
Many commercial banks (e.g., Bank of America) offer financing solutions geared specifically toward medical professionals.
Check whether yours offers business loans meant for financing a new practice.
Depending on how much you need, you stand to get competitive rates and favorable terms.
That said, be prepared to offer collateral in exchange for the cash infusion
Also, keep in mind that this loan type isn’t the quickest way to get working capital, as the approval process can take weeks at a minimum.
Business Line of Credit
If you’ve ever used a credit card for personal and business finances, a business line of credit might be the logical next step to financing a medical office.
It works almost the same way a credit card does in that you can draw from the credit line as needed.
This quality makes it one of the best financing options for professionals who own an existing practice that has issues with cash flow.
Small Business Administration (SBA) Loan
The SBA has partnerships with select banks, offering loans with low rates, long repayment terms, and large loan amounts.
Loan options like the agency’s 504 Local Development Company Program are popular among business people seeking lending products for businesses.
Like business banking loans, this type of loan has collateral requirements you must meet.
Also, consider other practice solutions if you need to secure financing quickly.
The application process for this practice financing method can be daunting, requiring a mountain of paperwork before you get credit approval.
Merchant Cash Advance
Rather than take a traditional loan to fund your medical practice’s startup costs, consider a short term loan like a merchant cash advance from an alternative lender.
Unlike standard loans with fixed monthly payments, this option works differently.
Here’s how it works: the lender gives you a cash advance in exchange for an agreed portion of your credit and debit card sales (either daily or weekly).
What’s great about this option is that you can get approval in short order (possibly within a business day).
Equipment Financing
As its name suggests, this loan type is meant for purchasing the equipment you’ll need to run your practice.
You’ll put up the equipment you purchase as collateral and repay for a term that may last as long as the equipment’s shelf life.
Practice Acquisition Loan
If you plan to grow your business by acquiring a similar medical practice (e.g., one with a retiring owner), you can do it with a practice acquisition loan.
These loans are also useful for purchasing a share of an existing medical business.
Lenders will demand that you put something up as collateral before giving you the funds to expand via acquisition.
They’ll also check your business’s financial health when making their decision to approve or reject your application.
Get Professional Help
Our team can source a business loan specifically for physicians.
If you’re in need of financing, reach out to us to get one that fits your needs.
Applying for the Loan—Eligibility, Documentation Requirements, and Considerations
While eligibility criteria vary from one lender to the next, the following constants apply across the board:
- Credit Score: Lenders expect a decent credit score of at least 600 or above.
- Business Bank Account: Remember: they’re loaning your business the money, not you.
- Length of Time in Business: Some lenders will not lend money to businesses that haven’t been open for six months or more.
- Collateral: This eligibility requirement depends on the type of loan sought.
Here’s a list of common documents you’ll need when applying for a loan for your healthcare business:
- Business plan
- Incorporation certificate
- Business license
- Bank and income statements
- Company balance sheet
- Tax returns
- Leasing agreement for commercial property
Lenders may also ask for your personal details and resume to know who they’re lending to.
Factors to Consider When Applying for a Loan
Before signing up for a loan, consider the following factors to keep costs down and understand what you’re getting into:
- Interest Rate: Is the interest rate fixed or variable? Prioritize the former rate if you want higher stability over the loan’s life.
- Fees: Origination, processing, and closing fees can increase the loan’s cost. Ensure you’re comfortable with these charges before deciding.
- Terms: Pay close attention to whether you must put up collateral to secure the loan.
When weighing these factors, base your decision on realistic projections of your practice’s growth and your concrete ability to meet repayment obligations.
Grow Your Medical Practice Confidently
Medical practice loans can provide the funds needed to start, grow, or buy into a medical practice.
However, with considerations like collateral, fees, and interest, deciding whether to apply for one isn’t an easy decision to make.
Consulting a financial advisor can help alleviate any concerns you may have. At Physicians Thrive, we have knowledgeable experts who are always willing to offer their expertise to individuals at all stages of their medical careers.
Contact us today to get expert advice that gives you the confidence to make informed decisions about your medical practice aspirations.
