Chronic cash flow problems affect many types of small businesses. But nobody understands the difficulties better than medical professionals. Most of the work you perform for patients is billed out to a third party. Insurance providers. Medicare. It can take weeks – often months – before you see reimbursements. Meanwhile, you still have to pay your monthly expenses. Medical practice business loans can smooth chronic cash shortages.
This 5-step process will help you get the small business loan you need, even if you have bad credit.
STEP 1: Take heart
It’s not unusual for a medical practice to develop bad credit. But it’s not a deal-killer. You can still get the financing you need. Let’s roll up our sleeves and find out how.
STEP 2: Learn to identify myths and avoid mistakes
Back in 2012, an article in American Medical News noted, “As new medical technology emerges every year and medical practices adapt to new demands, medical practice borrowing is on the rise.” While small business loans can help grow your medical practice, you have to know what you’re doing. The articles continues: “Some physicians continue to borrow in ways that end up backfiring or, at a minimum, keeping their practices from benefiting from the capital.”
Physicians, dentists and other medical professionals are highly educated. But that doesn’t make you a finance expert. It can be hard to separate fact from fiction when it comes to small business loans. Lending is a complex industry. And, frankly, there are lenders who don’t care about your goals. Only in making a profitable deal. Think of a doctor who only treats today’s symptom instead of considering the patient’s long-term health. My point? The right business lender is as important as the right small business loan.
STEP 3: Forget your bank
Big banks go out of their way to entice business from medical professionals. They see you as high-dollar, low-risk accounts – exactly what every bank wants most. But your bank’s “loyalty” won’t extend to small business loans. Not if your practice has bad credit.
Perhaps you’ve heard that the Small Business Administration guarantees small business loans. So, with their backing, your bank will help you after all, right? Maybe. But probably not. The SBA only guarantees part of the business loan, if you default. And you still need good credit to get an SBA loan.
Besides, chances are you need money now. It takes months to get a conventional or SBA loan from a bank. You’ll need to look elsewhere.
STEP 4: Look into alternative small business loans
Finally, here’s some great news – the reason I counseled you to take heart. Even with bad credit, you have business loan options. Options you can use to get the money your practice needs right now. Some of these options are good choices for one-time needs. Others offer ongoing opportunities to smooth cash flow.
What’s the big difference between bank loans and alternative business loans? Alternative lenders aren’t really interested in your credit score. That’s history. They want to know you can repay this new business loan. So they look at your current practice income and your predictable future earnings.
Before you explore these alternatives, you have to be clear on what you’re looking for. How much money do you need? For what purpose? You can handle emergencies, pay regular bills, or expand your practice. The right small business loans also help rebuild your credit. Here at UCS, you can borrow as little as $5,000. Banks not only require great credit, they don’t make smaller business loans. But most of time your medical practice doesn’t need to borrow a huge sum. On the other hand, if you need as much as $2 million, we can help you with that, too.
Favorite bad credit business loans for medical practices include:
Unsecured short term business loans that let you repay over 6 to 18 months. Interest rates are higher than conventional loans. Typically, you’ll have a fixed monthly payment.
- Merchant cash advances that let you borrow against future credit card transactions. Aside from third-party billings, your practice collects money in-office for co-pays, self-pays, etc. If you do enough credit card business, merchant cash advance can be a handy loan alternative.
- Accounts receivable loans that let you sell unpaid invoices to a third party. This is increasingly popular among medical professionals. With A/R factoring, you get your money without waiting, and you can get out of the collections business. I know you’d rather spend more time with patients along with having more time to read the latest medical journals.
I mentioned earlier that these alternative small business loans are fast. With United Capital Source, you can apply online and get an answer within 24 hours. You’ll get your money within a few business days. And if there’s a repayment schedule, we’ll work with you to select the most affordable terms. That might be daily, weekly, bi-weekly or monthly payments.
STEP 5: Create a strategic financial plan
You have a lot on your mind besides your finances. Patients come first, of course. Medical Economics says, “The business of medicine becomes more challenging each day. Throughout the country, physicians are experiencing organizational changes in the delivery system, reimbursement for demonstrated value rather than quantity of care, enhanced technology, and an ever-changing regulatory environment.”
Simply put you cannot practice medicine without stable finances. So devote some time to self-diagnosis. Why do you have bad credit? How did you get here? Without diagnosing the causes, you can’t find the best cure. Think of it as assessing the vital signs of your practice. That’s what the American Academy of Family Physicians recommends. It’s like the regular preventive medical care you recommend for your own patients.
Just because cash flow problems are legendary in the medical world doesn’t mean you have to accept bad credit. If that’s where you are now, then take steps to restore your good credit. It will take some time, but using small business loans wisely will help. You can get out of debt, smooth your cash flow, and focus on growing your medical practice.