Doctors are the last people you’d expect to need extra cash. While annual salaries for medical professionals may be quite rewarding, the same cannot be said about the payment structure for a medical business.
Between insurance reimbursements and patient co-pays, it can take several months for doctors to receive full payment for their services. This can make it challenging to cover recurring expenses like payroll and inventory. When the busy season arrives, doctors need plenty of help and can quickly run out of supplies.
United Capital Source has access to small business loans for medical practices to bridge these gaps in cash flow so healthcare professionals can serve as many patients as possible.
Medical practice loans are small business loans designed for medical professionals who own their own practices. Besides covering short-term and long-term costs, a medical practice loan allows medical business owners to stabilize their cash flow cycle and maintain operations during slow periods.
Medical practices can incur high startup costs, with estimates suggesting that at least $100,000 is needed to start a practice. Medical professionals often require financing to cover operating expenses or to expand their practices during slower business periods.
Medical professionals commonly seek outside funding to help finance their practice’s startup and operational expenses. Due to their high income levels, it is generally easier for medical professionals to obtain loans than in other industries.
Medical practice loans can come in the form of:
The central purpose of medical practice loans is to give medical professionals the option of several products that best suit their small business needs. Online lenders may offer better terms to small businesses than traditional banks and have less stringent qualifications for borrowers.
For example, one of the biggest challenges of medical practices is the amount of time it takes to receive full compensation, or only small amounts of cash coming in at a time. This can be especially troublesome when business slows down or essential medical equipment becomes outdated. Medical professionals often require financing to cover operating costs or equipment expenses during slower times of the year.
Several products, like business lines of credit, medical equipment financing, business term loans, or accounts receivable factoring, can solve these dilemmas. Equipment financing might be the most sensible option if the medical equipment is costly and will be used for at least three years.
On the other hand, a business line of credit is designed to cover short-term expenses, like monthly bills or inventory. Business lines of credit allow medical professionals to borrow up to a certain amount and draw funds as needed.
However, if you’re waiting for sizable insurance reimbursements, you would sell the unpaid receivables for a discount. You’d get cash in just a few business days instead of waiting weeks (or months) for compensation.
The factoring company is now responsible for collecting the payment from the insurance carrier. When the payment is received, you are paid the remainder of the first sale minus fees.
Consider a merchant cash advance if you have subpar credit or rocky cash flow. This highly accessible option allows you to borrow against the strength of your debit and credit card sales.
For many doctors, this is the preferred payment method for their patients. You could theoretically access plenty of cash to get through a slow season without making substantial payments until business picks up.
SBA loans offer stable financing for established practices with good credit. SBA loans are government-sponsored financing options for small business owners with appealing interest rates and long repayment terms. Medical professionals may face tighter approval requirements when seeking SBA loans. The US Small Business Administration partially guarantees these loans. Note: SBA guidelines require substantial documentation.
| LOAN TYPES | MAX AMOUNTS | RATES | SPEED |
|---|---|---|---|
| Merchant Cash Advances | $7.5k – $1m | Starting at 1-6% p/mo | 1-2 business days |
| SBA Loan | $50k-$10m | Starting at Prime + 2.75% | 8-12 weeks |
| Business Term Loan | $10k to $5m | Starting at 1-4% p/mo | 1-3 business days |
| Business Line of Credit | $1k to $250k | Starting at 1% p/mo | 1-3 business days |
| Receivables/Invoice Financing | $10k-$10m | Starting at 1% p/mo | 1-2 weeks |
| Equipment Financing | Up to $5m per piece | Starting at 3.5% (SBA) | 3-10+ business days |
| Revenue Based Business Loans | $10K – $5m | Starting at 1-6% p/mo | 1-2 business days |
Medical practice loans give medical professionals the resources to maximize their service capacity. You can continue taking appointments without worrying about insufficient medical equipment, supplies, or staff to meet demand. This makes busy periods much less overwhelming.
Medical technology is also becoming more advanced very quickly. Medical practice loans allow healthcare professionals to acquire these tools immediately, even during slow periods. Medical professionals often have access to loans due to their consistent revenue generation. High operating costs can lead medical practices to seek loans even when successful.
At United Capital Source, your current cash flow doesn’t have to be perfect to access the loan amount and repayment terms that make the most sense for your medical practice.
Another significant advantage is staying current on bills while waiting for insurance reimbursements or patient co-pays to come in. Establishing a solid payment record with vendors or suppliers can give you access to discounts, lower rates, or longer repayment terms in the future.
Lastly, it’s important to remember that even though most medical professionals started their careers to help people, they must stay competitive like any other small business owner. This might involve ramping up their advertising or renovating their waiting area.
The medical payment structure makes it difficult to save money for growth, hence the necessity for a medical practice loan.
With so many potential expenses and cash flow gaps, some small business owners might find it challenging to choose the right business loan program for their financing needs. Choosing the wrong loan terms can pressure your cash flow and ultimately take your attention away from your number one concern, which is helping your patients.
The likelihood of this scenario decreases when you research each option before seeking funding. However, many doctors would likely admit they are too busy to research business loan products and online lenders while running their businesses.
The myriad financial dilemmas medical practices face also make it hard to determine how much to borrow. Asking for too little could leave certain expenses unaccounted for. Credit approval from some options is more stringent than others.
On the other hand, asking for too much could result in more debt than you can afford to pay back. Doctors are more likely to commit the latter mistake since their recurring expenses often seem to be increasing by the minute.
Here’s a quick summary of the pros and cons of using business financing to grow your medical practice.
Pros:
Cons:
The amount of paperwork required for the application depends on your chosen product. Funds can be approved and distributed within three business days for most loans and lines of credit.
Here’s how to apply:
The first step is choosing the most sensible loan terms for the problem at hand. This should require some research, as each loan program is designed for different expenses and cash flow cycles.
Are you looking to cover a short-term or long-term cost? Is demand expected to increase or decrease in the coming months?
Considering the funds’ purpose will also help determine the best loan amount and terms for your needs.
Step 2: Gather Your Documents
Here are the documents and information required for medical practice loans:
SBA 7 (a) Loans and other types of SBA loans require additional documents and information, such as business tax returns.
Visit our SBA Loan page to learn what’s needed for the SBA 7 (a) Loan application.
You can begin the application process by calling us or filling out our one-page online application.
Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Once you apply, a representative will contact you to explain the repayment structure, rates, and terms of your available options.
This way, you won’t have to worry about any surprises or hidden fees during repayment.
If and when approved, funds should appear in your bank account anywhere from 24 hours to one week.
For SBA Loans, it usually takes 3-5 weeks to receive funding.
Your business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all your required payments on time and in full. Keep your balance below the credit limit if you get a business line of credit or another form of revolving credit.
Consistently making your business financing payments on time and in full will positively impact your business credit, depending on the loan program. And that means preferred rates and terms when you next need financing.
If your application is declined, you might have applied for the wrong product for your cash flow. We would likely recommend a different product with less hazardous repayment terms in this case.
Your application might also be declined after it is determined that you cannot afford more debt. Your needs and financial circumstances might be better suited for another financing tool, like a business credit card or a personal loan.
Both options can be accessed through UCS and are usually much easier to qualify for than small business loans from traditional banks.
Consider credit repair services if your credit score prevents you from accessing financing. We can help you identify the issues that keep your score down and develop practical solutions for eliminating them.
Medical practice business loans can help a wide range of physicians and other health professionals. There are several hurdles to overcome when opening your own practice. Many medical professionals encounter significant financial hurdles. Other medical professionals may need funding to fuel growth.
Maybe you’re still paying off medical school debt or having trouble competing with established businesses and other healthcare professionals. A medical practice loan can help you overcome these challenges and start your practice. An alternative business loan may be more accessible than a traditional loan.
Here are some examples of practices that are most likely to use medical practice loans.
Many doctors aspire to run their own medical practice and become the go-to physician in their respective communities. However, opening and running a primary care practice requires significant capital. Physician loans can help overcome these challenges.
Establishing a practice requires acquiring office space and furnishing it with welcoming and comforting surroundings for your patients. It also requires hiring excellent staff, having medical equipment and supplies, and establishing vendor relationships.
The mental health profession includes psychologists, psychiatrists, and therapists. All three require office space, and psychologists often need additional resources for research.
Ophthalmologists are eye doctors who perform surgeries. They require capital for surgical equipment, supplies, and staff.
Optometrists study the eyes to determine issues with sight. Their practices require equipment for testing eyesight and supplies like eye droppers.
Opticians focus on prescribing eyeglasses and contacts. They often require supplies and resources to help patients find the right solution.
Like primary care physicians, pediatricians help support health and wellness in the community, but focus on children. In addition to all the standard medical equipment and supplies (tongue depressors, syringes, etc.), pediatricians often need to purchase toys, puppets, or other kid-friendly distractions that help their patients (and their parents) feel more comfortable.
Dermatology is another outpatient specialty where care providers are often small business owners. Dermatology focuses on skin health, and dermatologists are the first line of defense against skin cancers like melanoma.
Running a dermatology practice requires comfortable office space for your patients and medical staff. You will also need to resupply your inventory regularly.
Pathologists are often considered “the doctor’s doctor” because they process lab results and make diagnoses. Blood samples, test results, and biopsies are sent to a pathologist for analysis.
Starting and running a pathology lab requires medical equipment, such as centrifuges, microscopes, and more. In addition, pathology labs need robust computer systems to handle the different requests from various other medical practices.
This depends on where you apply and the type of product you have in mind. Some SBA loan programs and banks typically require collateral, such as commercial real estate, for all loans.
On the other hand, companies like United Capital Source have access to programs that may only require collateral for equipment financing. If you have an existing practice with excellent credit and strong cash flow, you don’t need commercial real estate to access high borrowing amounts, low interest rates, and long terms.
However, if you have subpar credit or rocky cash flow, you may still be able to access these advantages by providing collateral. The repayment schedule can vary depending on the loan you receive.
Medical practice lenders can include banks, financial institutions, and private investors. If you’re looking for the best loans on the market, you’ll need excellent personal & business credit, collateral, plenty of money in the bank, high annual revenue, and at least two years in business.
The products United Capital Source has access to are much easier to qualify for. Online lenders often have less stringent qualifications compared to traditional banks. Alternative lenders might not require collateral for smaller loans up to $150,000. Your ability to meet the abovementioned requirements will determine your loan amount, interest rates, and terms.
But falling short in any (or more than one) of these areas won’t stop your medical practice from qualifying for multiple loan products. With some products, your credit score and tax returns are practically irrelevant.
For example, a merchant cash advance eligibility is based on your monthly debit and credit card sales volume. With accounts receivable factoring, eligibility depends more on your customer’s creditworthiness than yours.
Qualifications for medical practice loans are typically based primarily on the health of the medical practice and the individual medical professional’s creditworthiness. Lender policies may vary regarding the required financial records during the loan application process. The application will typically include personal financial information from the applicant and financial information from the practice.
The Small Business Administration provides loans through approved financial institutions. Many healthcare professionals must have been in business for at least one year to qualify for an SBA loan. When applying for an SBA loan, you typically need to provide verification of your employment status and the nature of your medical business practice. After submitting the loan application, it may take as long as three months before you hear back from the SBA. SBA Express programs can provide faster funding options for lower borrowing amounts. Some loans require medical professionals to carry flood insurance.
New doctors often start their careers with significant debt, averaging over $166,000. Depending on the size of a medical practice, operating expenses can exceed $1.1 million annually. Medical professionals can utilize funding to consolidate multiple expenses into one payment.
Physicians’ business loans can be used for a myriad of purposes. They include:
According to the Medical Group Management Association, U.S. medical practices fail to collect an average of 25% of the money they’re owed for treating patients. This is mainly attributed to doctors’/dentists’ lack of time to chase down insurance carriers for reimbursement.
If they forget about the payment, the carrier forgets about them. This is when accounts receivable factoring comes into play.
When you factor unpaid receivables, the factoring company takes over the responsibility of collecting from the carrier. Also, getting paid immediately after servicing patients allows you to plug money into your business and improve profitability quickly.
Continuing to wait several months to get paid has the opposite effect. If your business loses profitability, you might have to cut back on crucial expenses like staff, inventory, equipment, etc.
Many doctors are mainly dependent on reimbursements from Medicare and Medicaid. From a legal standpoint, Medicare and Medicaid can only send reimbursements to doctors, not factoring companies. However, you can solve this dilemma if your factoring company offers “Lockbox” accounts.
Here’s how this works:
The factoring company sets up an exclusive bank account for receiving factoring payments. When the federal agency sends the reimbursement, it goes straight to the lockbox account instead of the factoring company.
Once the payment is received, the bank immediately transfers the money into the factoring company’s regular bank account.
Yes, most medical practice loans are accessible for borrowers with bad credit. Your interest rate may be higher, and your terms may be shorter because poor credit makes you more likely to default.
Many medical professionals face financial challenges early in their careers, often graduating with significant debt. This can negatively impact credit scores, making it difficult to receive financing.
Your interest rate may be higher, and your terms may be shorter because poor credit makes you more likely to default. However, if you have strong financials or can provide collateral, bad credit may impact your interest rate and terms less. The only two products that are not accessible with bad credit are business term loans and SBA loans.
These products carry high borrowing limits, a lower interest rate, and long terms. The other six types of medical practice loans usually have shorter terms and are much easier to repay. We can also customize your terms and payment frequency to ensure that you can make daily, weekly, or monthly payments while staying current on other bills.
Fraud Disclosure:
Please be aware that individuals have been fraudulently misrepresenting to business owners (and others) that United Capital Source, Inc. (“UCS”) can assist small businesses in receiving government grants and other forgivable business loans, when in fact those grants or loans do not exist or are not available. These individuals have ulterior motives and are engaging in the unauthorized use of the names, trademarks, domain names, and logos of UCS in an attempt to commit fraud upon unsuspecting small business owners.
UCS will never communicate with a prospective client on Facebook, Facebook Messenger, or any other type of social media. Further, any email communications will always come from an official UCS email address and not a Gmail, Yahoo, or other email domain. If you believe you have been contacted by someone posing as an employee of UCS, please email [email protected].
