Today, doctors, specialists have access to a wide range of medical practice loans. To determine the loan which will meet your specific requirements will depend on your needs. It will depend on how soon you need the funds, what sort of flexibility you are looking for and how quickly you’ll be able to repay the loan. It can also depend on whether you are able or not to put up any collateral in exchange for the financing.
The five loan options available as medical practice loans will consist of traditional bank loans, short term loans, term loans, and business lines of credit. They all have their pros and cons and go through them to help you understand the importance of each and determine which is best for you.
Medical Practice loans and traditional banks
A lot of people who want to apply for a loan are looking for options other than the traditional bank. Even though the bank loan application process is quite difficult, if an applicant does get selected, a bank is a better option than many of the other medical practice financing loans options.
A lot of banks offer loan options in the medical field. US Bank and Wells Fargo are two examples of banks that are known for providing loans to healthcare experts, like vets, doctors, optometrists, and dentists, among others. By providing loans and directly connecting to the varied medical professionals, the banks are able to understand the associated risk in a better way. However, there are many things, like credit gaps (owing to the high generating potential of the medical care staff, insurance, and keeping a record of similar past applicants) and college student loan debt (which a lot of doctors have), that could really affect the approval of the loan application.
Loans from traditional banks are a lot harder to obtain. Only the people who have a great credit score and are totally trustworthy get the loan. If you feel that you would meet the criteria, then you should definitely go ahead and apply for medical practice loans from a traditional bank. They are the least expensive loans from the bunch, not to mention loans that are specially designed for your field are way better than generic loans.
Here are a set of pros and cons of bank healthcare loans that are meant for medical business practices.
• Comparatively cheaper
• Designed for the medical profession
• People with a poor credit record and pre-existing student loan debts have a lesser chance
• Difficult to obtain
• Not ideal for people who want quick funds
This type of loan was created keeping in mind the medical profession, but it doesn’t mean that you are guaranteed to quickly be accepted for the loan just because you are in the profession. The time taken for just approving the application could be extended without any warning. And, even if you do get selected for the loan, it might actually take a couple of months for you to get that money.
However, if you are looking for a long-term financing solution for something like purchasing or leasing a real estate, buying medical equipment, or purchasing a pre-existing medical practice, then traditional banks are considered to be a great option.
Term loans for medical professionals
When you think of a traditional business loan, a “term loan” might come to your mind. In such a loan, a financial institution meant for medical practitioners would fund you with a lump sum amount of money. This money is to be paid back over a stipulated time period, along with the interest.
Therefore, the medical practice term loans are specially designed to help professionals in the healthcare field, including doctors, and health specialists, while keeping in mind their specific requirements and preferences. Apart from being able to go about it through a traditional bank, this program will also include an alternative lender (online lender) that solely functions on the group of medicals.
How is it different than traditional banking loans?
The main points that matter are the direct access and the charges. The emergence of alternative lending is a response to small business owners not being able to secure a loan or funding, especially after the economic crisis. The good news is that a lot of options have emerged in the recent times that have made it easier for applicants to get loans without needing to have the best credit or fulfilling any such requirement. Although they are easier to get, in the long run, they will end up being more costly than a traditional bank would have if the application was approved.
• Not too many requirements
• Faster process
• More chances of selection
• The loan is specific to the medical field
• More costly than traditional banks
• Very hard to get accepted
The terms and conditions for the loans are not bad but, some of the companies that give the loans have a higher standard for applicants that are shortlisted. For example, they may require you to be in the business for a couple of years at least, have a great credit history, or have a high annual rating.
Short-term options from alternate lenders
Both the alternative bank loans and SBA loans have a higher interest rate and a shorter payback period whether it is for a short-term loan or a long-term loan. But, they do provide quick funding.
So, if after calculation and careful comparison you feel that you will be able to pay back the loan comfortably then you should go ahead with the option.
A lot of the people who apply for loans need it quickly, which is why the online short-term loans may be a perfect fit for many. This way, you would quickly receive the cash that you need without having to carry the debt for long-term.
• Fast process
• Relaxed requirements for applicants
• Quicker payback options
• Increased rate of interest
• Not designed for medical professionals
If you have been in the business for quite some time and you can accurately predict the cash-flow of it, then you must be confident enough to take on the short-term loan. The quick process for the application to get reviewed and also for the loan to reach your account can be the best option for the business.
Lines of credit for Medical practice
The business line of credit is different than the other types of medical loans that we have mentioned above.
It will be easier for you to understand how the line of credit works if you look at it like a credit card. The application for a line of credit is approved for a sum of amount. But, you only pay back the amount that you actually used to acquire something. Another major plus point of the line of credit is that the cash is made available to you very quickly. You might want to hold on and be careful with how you spend it.
For example, let us assume that you have $1,000,000 dollars worth of loan that you took to invest in your medical practice. Within the short-term of the loan, you will only want to withdraw the necessary amount like the $10,000 that you needed for urgent expenditures. This means that you will only be required to pay on the amount that you actually used instead of having to pay on the $1,000,000. As you go on to repay the capital, the installments that are known as the “revolving” line of credit.
• Quickly accepted
• Interest only applicable to cash used
• Variable payment conditions
• Quick usage of funds
• Additional fees and costs add up
• Not suitable for one-off purchases
Due to the flexibility and the cost efficiency of the line of credit, it is looked upon as the better option for general practitioners as well as specialists especially those that have varying bills and need to purchase equipment from time to time.
People require loans and funding for different reasons. If your need is to buy or upgrade tools and equipment then you may want to look into equipment financing. This order is specific to only purchasing specific items. In fact, you have to provide a quotation to the lender in order to obtain the funding.
Equipment loans are great if the equipment you need to purchase is something as big as an MRI machine. This is because the machine could be used for collateral intentions for the loan. This is great as you may not even have to touch your own assets in order to pay back the loan. Planning to purchase a higher worth part of equipment could also help you in keeping the cost that you have to pay back to a bare minimum.
• Easier eligibility criteria
• No dependence on additional collateral
• You own the equipment
• Can only be used to purchase equipment
• Quickly obsolete or hyper-specific equipment have less collateral and more interest rate.
Equipment financing as a loan for medical practice is very limited but, if your goal is to purchase equipment only then this is the best option for you as the criteria for being selected is not as strict as the traditional bank’s rules are.