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no collateral required*
a few business days
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Intro To Medical Practice Business Loans
Doctors are the last people you’d expect to need extra cash. While their annual salaries may be quite rewarding, the same cannot be said about their payment structure. Between insurance reimbursements and patient co-pays, it can take several months for doctors to receive the full payment for their services. This can make it challenging to cover recurring expenses like payroll and inventory. And when the busy season arrives, doctors need plenty of help and can quickly go through supplies. United Capital Source offers Medical Practice Business Loans to bridge these gaps in cash flow so doctors can serve as many patients as possible.
In this guide, we’ll answer the following questions and more:
- What Are Medical Practice Business Loans?
- How Do Medical Practice Business Loans Work?
- What Are The Advantages of Medical Practice Business Loans?
- What Are The Disadvantages of Medical Practice Business Loans?
- How Do You Apply For Medical Practice Business Loans?
- What If I’m Declined For a Medical Practice Business Loan?
- Is Collateral Required For Medical Practice Business Loans?
- How Do You Qualify For Medical Practice Business Loans?
- How Would You Use Medical Practice Business Loans?
- Why Should Medical Practices Use Accounts Receivable Factoring?
- Can You Factor Accounts With Government Agencies?
- Can I Get a Medical Practice Business Loan With Bad Credit?
What Are Medical Practice Business Loans?
Medical Practice Business Loans are business loans geared towards the cash flow cycles and expenses of medical practices. Besides covering short-term and long-term costs, Medical Practice Business Loans allow doctors to stabilize their cash flow cycle and maintain operations during slow periods.
Medical Practice Business Loans can come in the form of:
- Business Term Loans
- SBA Loans
- Business Line of Credit
- Equipment Financing
- Working Capital Loans
- Merchant Cash Advance
- Revenue-Based Business Loan
- Accounts Receivable Factoring
How Do Business Loans For Doctors & Medical Practices Work?
The central purpose of Medical Practice Business Loans is to give borrowers several products to choose from to best suit their needs.
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 equipment becomes outdated.
These dilemmas can be solved by several products, like a Business Line of Credit, Equipment Financing, or Accounts Receivable Factoring. Equipment Financing might be the most sensible option if the equipment is costly and 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.
If you’re waiting on sizable insurance reimbursements, however, you could also consider Accounts Receivable Factoring. You would sell the unpaid receivables for a discount price (at least 85%). Instead of waiting weeks (or even months) for compensation, you’d get cash in just a few business days. It is now the responsibility of the factoring company to collect the payment from the insurance carrier. When the payment is received, you get paid the remainder from the first sale, minus fees.
If you have subpar credit or rocky cash flow, you might consider a Merchant Cash Advance instead. 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 back up.
Medical Practice Loan Options Compared
|LOAN TYPES||MAX AMOUNTS||RATES||SPEED|
|Merchant Cash Advance||$7.5k – $1m||Starting at 1.09||1-2 business days|
|SBA Loan||$50k-$10m||Starting at 5%||3-5 weeks|
|Business Term Loan||$10k to $5m||Starting at 5%||1-3 business days|
|Business Line of Credit||$10k to $250k||Starting at 8%||1-3 business days|
|Receivables/Invoice Factoring||$50k-$10m||Starting at 5.8%||1-2 weeks|
|Equipment Financing||Up to $5m per piece||Starting at 5%||3-10 business days|
|Revenue Based Business Loans||$10K – $5m||Starting at 9%||1-3 business days|
What Are The Advantages of Medical Practice Business Loans?
Medical Practice Business Loans give doctors the resources to maximize their service capacity. You can continue taking appointments without having to worry about not having enough equipment, supplies, or staff to meet demand. This makes busy periods much less overwhelming.
Medical technology also becomes more advanced very quickly. Thanks to Medical Practice Business Loans, doctors can acquire these tools immediately, even during slow periods. At United Capital Source, your current cash flow doesn’t have to be perfect to access the borrowing amount and terms that make the most sense for your desired purchase.
Another significant advantage is the ability to stay 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 payment terms in the future.
Lastly, it’s important to remember that even though most doctors started their careers to help people, they must stay competitive like any other business owner. This might involve ramping up their advertising or renovating their waiting area. The medical payment structure doesn’t make it easy to put money away for growth, hence the necessity for additional funding.
What Are The Disadvantages of Medical Practice Business Loans?
With so many potential expenses and cash flow gaps lying ahead, some doctors might find it challenging to choose the right business loan product for their needs. Choosing the wrong repayment system 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 that they are far too busy to research business loan products while running their businesses.
The myriad of financial dilemmas medical practices face also makes it hard to figure out how much to borrow. Asking for too little could leave certain expenses unaccounted for. On the other hand, asking for too much could give you more debt than you can afford to pay back. Doctors are more likely to commit the latter mistake since it often seems like their recurring expenses are getting larger by the minute.
Who Qualifies For Medical Practice Business Loans?
Approved businesses generally met the following criteria:
How To Apply For Medical Practice Business Loans:
The amount of paperwork required for the application depends on your chosen product. For most products, funds can be approved and distributed in up to three business days. Here’s how to apply:
Step 1: Choose the Right Product
The first step is choosing the most sensible solution to the problem at hand. This should require a decent amount of research, as each product is designed for different types of 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 us determine the correct borrowing and terms for your needs.
Step 2: Gather Your Documents
Here are the documents and information required for Medical Practice Business Loans:
- Driver’s license
- Voided business check
- Bank statements from the past three months
- Invoice for equipment (for Equipment Financing)
- Credit card processing statements from the past three months (for Merchant Cash Advance)
- Accounts Receivable Aging Report (for Accounts Receivable Factoring)
- Accounts Receivable (for Accounts Receivable Factoring)
- Debt Schedule (for Accounts Receivable Factoring)
SBA Loans require additional documents and information. To learn what’s needed for the SBA Loan application, visit our SBA Loan page.
Step 3: Fill Out 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.
Step 4: Speak to a Representative
Once you apply, a representative will reach out to 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.
Step 5: Receive Approval
If and when you’re approved, funds for Business Term Loans, Business Lines of Credit, Working Capital Loans, Equipment Financing, Merchant Cash Advance, Revenue-Based Business Loans, and Accounts Receivable Factoring should then appear in your bank account in anywhere from 24 hours to one week. For SBA Loans, it usually takes 3-5 weeks to receive funding.
Your Medical Practice Financing Gets Set Up – Now What?
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 of your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.
Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred rates and terms when you next need business financing.
What If I’m Declined For a Medical Practice Business Loan?
If your application is declined, it might be because you applied for the wrong product for your cash flow. In this case, we would likely recommend a different product with a less hazardous repayment structure.
We might also decline your application after determining that you cannot afford to take on more debt at this time. Instead, your needs and financial circumstances might be better suited for another financing tool, like a business credit card or even a personal loan. Both options can be accessed through UCS and are usually much easier to qualify for than business loans.
If your credit score is preventing you from accessing financing, you should consider these credit repair services. We can help you identify the issues that keep your score down and develop practical solutions for eliminating them.
People Also Ask:
Is Collateral Required For Medical Practice Business Loans?
This depends on where you apply and the type of product you have in mind. Banks typically require collateral for all loans. Companies like United Capital Source, on the other hand, have access to programs that may only require collateral for Equipment Financing. If you have excellent credit and strong cash flow, you don’t need collateral to access high borrowing amounts, low 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.
How Do You Qualify For Medical Practice Business Loans?
If you’re looking for the most advantageous loans on the market, you’ll need excellent credit, perfect cash flow, collateral, plenty of money in the bank, high annual revenue, and at least two years in business.
Products from companies like United Capital Source are much more accessible. Your ability to meet the aforementioned requirements will determine your borrowing amount, rates, and terms. But falling short in any (or more than one) of these areas won’t stop you from qualifying for multiple products. With some products, your credit score is practically irrelevant. For example, eligibility for a Merchant Cash Advance is based on your monthly debit and credit card sales volume. With Accounts Receivable Factoring, eligibility is more dependent on your customer’s creditworthiness, not your own.
How Would You Use Business Loans For Doctors & Medical Practices?
Physicians’ Business Loans can be used for a myriad of purposes. They include:
- Purchase medical or office equipment
- Remodel your medical or surgical facility
- Market your practice
- Bring on another physician
- Cover regular expenses/paying bills while waiting for insurance payments
- Cover regular expenses during slow periods
- Purchasing inventory/supplies
- Hire more staff
- Buy out another practice or add a second location
Why Should Doctors & Medical Practices Use Accounts Receivable Factoring?
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 mostly attributed to the fact that doctors don’t have the 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 your 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 back 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.
Can You Factor Accounts With Government Agencies?
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.
Can I Get a Medical Practice Business Loan With Bad Credit?
Yes, most Medical Practice Business Loans are accessible for borrowers with bad credit. Your rates may be higher, and your terms may be shorter because poor credit makes you more likely to default. However, if you have strong cash flow or can provide collateral, your bad credit may have less impact on your rates and terms.
The only two products that are not accessible with bad credit are Business Term Loans and SBA Loans. These products carry high borrowing limits, low rates, and long terms. The other six types of Medical Practice Business Loans usually carry shorter terms and are much easier to repay. We can also customize your terms and payment frequency to ensure that you can make payments while staying current on other bills.