Best Small Business Loans For Medical Practices

Small business medical practice loans can help expedite the launch or growth of your business. However, it’s important to make an educated choice when selecting a lender to set yourself up for success. PrimeRates.com can simplify the shopping and application process for medical practice loans. You can receive personalized loan offers through PrimeRates’ quick and simple pre-application online process. Below, we have compared some of the top lending options for medical practice loans.

What is a medical practice loan?

Small business loans for medical practices can help doctors who own their own practice secure funding. Most doctors can qualify for a medical practice loan due to their solid net worth, high earning potential, and consistent revenue. Doctors can avoid hefty amounts of paperwork and save time using alternative lenders. 

How does medical practice financing work?

The specifics of how medical practice financing works can vary depending on the type of loan you use. If you use a term loan such as a personal loan or traditional business loan, the loan should be funded as a lump sum and repaid in monthly installments. If the loan has a fixed interest rate, payments should be the same during the life of the loan. If you use a line of credit, you will be able to draw money from the line of credit as needed. Interest will only be charged on the funds you draw. Just like a term loan, the funds borrowed will need to be repaid. Regardless of the type of loan you pursue, you will need to start by getting pre-qualified.

Can you get a medical practice loan?

You can get a medical practice loan as long as you meet the lender’s qualifications. Most will want to see a high credit score and strong business history, but others may use assets as collateral. If you are unable to meet these qualifications, you may want to look into alternative loans and other financing options. Most banks and credit unions offer medical practice loans. In addition, online lenders can offer medical practice loans too. Online lenders are becoming increasingly popular for offering competitive terms and unbeatable convenience.

Types of medical practice loans

There are many types of medical practice loans available. Here are a few you can choose from.

• Medical practice loans: Medical practice loans are essentially just business or personal loans used by medical practices. Typically, these are term loans with fixed rates and fixed payments. In most cases, medical practice loans can be used for any business-related expense.
• Equipment financing: Equipment financing must be used to purchase equipment. It’s a good option for businesses that can’t show a high credit score or a strong business history because the equipment is used as collateral. However, if the business defaults on the loan, it could lose its equipment.
• Term loans: Term loans are provided in lump sums and must be paid back over time with interest. Term loans are usually best for one-time expenses or businesses that need a lump sum of cash. They can come with a variety of terms, usually ranging from 1-5 years. You should be able to find term loans with single-digit interest rates. Term loans usually do not require collateral and are extended based on a borrower's creditworthiness and or the financial stability and track record of a business.
• SBA Loans: The SBA (Small Business Administration) is a government agency with the mission to support small businesses. While you may have to complete a vigorous application process, the SBA can provide competitive loans for small businesses. They tend to be more forgiving than bank loans if a business defaults on payments.
• Business Line of Credit: A business line of credit is a revolving line of credit that is usually secured by an asset. For medical practices that need access to cash on a regular basis, a line of credit may be the best option. You will have access to a certain amount of cash that you can draw from at any time. You will only be charged interest on the money you draw.

How much does it cost to start a medical practice?

Starting a medical practice can be expensive. Let’s take a look at some of the costs...

Dentistry - The average total cost for new dental startups can range from $350,000 to $500,000.

General Medicine - Starting a small general medicine practice can range from $70,000 to $100,000 plus. 

And More Practices

No matter what kind of private practice you intend to open, initial startup costs can range from $20,000 to $30,000. 

Pros and Cons of financing your medical practice

Pros

• Launch or grow your business faster
• Build business credit 

Cons

• Taking on debt
• Interest and fees

What are the average interest rates I can expect to pay for a medical practice loan?

The interest rates you pay for medical practice financing will vary depending on a few factors. One is the type of loan you’re getting. If you qualify for a bank or SBA loan, you may be looking at rates of 5.5% – 8%. SBA loans are designed for small businesses that need funding. The average business loan rate at banks is between 2.54% - 7.02%. Keep in mind that rates can vary depending on several factors so you may qualify for a rate higher or lower than the average. This is why it’s important to check several offers based on your financial situation to ensure you are getting the best deal possible.

What credit score is needed to apply for a medical small business loan?

Most lenders will want to see a good credit score before approving you for medical business loans. Basically, the higher your credit score is, the more likely you will be to get approved and the lower your interest rates will be.

To qualify for a business loan you should have a credit score 640 or better. However, it’s a good idea to aim even higher. The higher your credit score is, the lower your interest rates should be. It’s ideal to have a score of 700 or above.

If your score is below 640, you may still be able to qualify, but you will find it difficult to get anything other than a short-term loan that comes with high interest rates.
If your score is below 550, you may want to look into other lending options or apply with a co-applicant.

Can I obtain medical practice business financing with a 600 credit score?

A credit score of 600 is a little low but you can still qualify for a loan. Lending Club and Quarter Spot are two examples of lenders that can accept businesses with credit scores of 600 and even lower. You will have better chances of getting approved if you can accompany your score with a strong business history.

Keep in mind that lenders that accept lower credit scores may charge higher interest rates.

How can a medical practice loan be used?

A medical practice loan can be used to cover the following expenses and more:

• New equipment: The equipment you require will depend on the type of medical practice you are running. It may include exam tables, dental chairs, stethoscopes, examination lighting and more.
• Working capital: Working capital is the amount of money the business has available to meet current expenses. This can come in the form of medical practice financing.
• Startup costs: Startup costs can include everything from hiring staff to leasing or buying and renovating a building to purchasing equipment and so on. Startups may need to use a personal loan to cover costs as they may not have enough time in business to qualify for an official business loan.
• Creating an inviting space: It’s important for medical facilities to offer an inviting space that puts patients at ease. Financing will be required for a nice paint job, remodeling, and other décor elements.
• Employees: Payroll can be one of the biggest business expenses. You may require medical practice loans to hire and pay your staff.
• Insurance costs: A medical practice requires liability insurance, property insurance, workers compensation and overhead insurance to name a few.
• Marketing: A good marketing campaign is necessary in bringing patients through the door. You may require medical practice loans to cover related expenses such as marketing materials, marketing software and a marketing team.

How fast can a healthcare business loan be funded?

Alternative lenders can fund medical practice loans as soon as one business day.

Best Medical Small Business Loan Options

Online Term Loans

Online terms loans can secure your business a lump sum upfront that you must repay over a set period of time. 

Pros 

• Borrow large amounts
• Long repayment terms
• Quick approval and funding
• Requirements may be looser

Cons

• Payments begin immediately after funding
• Collateral may be required
• Shorter term loans 

OnDeck

Originally founded in 2017, OnDeck is one of the largest online small business lenders that can provide quick funding. 

Pros

• Transparent terms
• Access to loans through business debit cards feature coming soon
• Funds available quickly

Cons

• Higher APRs
• Origination fee
• No factoring is offered (all funding options incur debt)

» MORE: OnDeck Business Loans Review

StreetShares

StreetShares is an online lender that can provide lines of credit, installment loans, and contract financing for medical practices. It was originally founded by veterans for veterans, but can serve non-veterans as well. 

Pros 

• Relaxed borrower qualification
• Competitive rates
• No prepayment penalties
• Outstanding customer service

Cons

• Not the best option for larger businesses
• Must have 1 year in business or $100,000 in revenue

LendingClub

LendingClub offers peer-to-peer lending options with fast approval and reasonable interest rates. Peer-to-peer lending connects people with money to people who need to borrow money. 

Pros

• Clear terms outlined prior to signing up for a loan
• Well established pattern of service
• 36- or 60-month terms
• Information easily accessible on their website
• Receive pre-approved offer in minutes
• Easily apply online
• Loans are usually funded in less than 10 days
• Competitive interest rates between 6 to 30 percent
• Nationwide availability for most types of credit

Cons

• Application process may require copies of tax documentation
• Passes accounts into collection quickly after a missed payment
• Unsecured loans only

» MORE: LendingClub Business Loans Review

QuarterSpot

Founded in 2013, QuarterSpot is an online lender that can provide short-term loan products for medical practices. 

Pros 

• Minimum credit score 550
• Prepayment discount
• Transparent terms and fees

Cons

• Additional fees may apply
• High origination fee
• Moderate factor rate

SBA 7(a) Loans

The Small Business Administration (SBA) is a government resource created to encourage the growth of small businesses. The SBA may be a more affordable and accessible option for medical practices that need funding. 

Pros 

• Easier to secure than traditional loans
• Lower interest rates
• Down payments as low as 10%

Cons

• Personal collateral may be required
• Long application process
• Lenders have more discretion in setting loan terms 

SmartBiz

SmartBiz is an online lender that can provide financing for medical practices. 

Pros

• Low APRs
• Repayment terms up to 10 years
• Easy application and approval process

Cons

• Variable APR
• Longer loan term can increase the cost of the loan
• Strict requirements on how money is spent
• High fees

» MORE: SmartBiz SBA Loan Review

Business Lines of Credit

A business line of credit can be compared to a business credit card. However, with a business line of credit, you can withdraw cash if necessary. 

Pros 

• Helps balance cash flow
• Only pay for what you use
• Take advantage of more opportunities

Cons

• Charges and fees
• Difficult to qualify for
• Low borrowing limits

BlueVine

BlueVine can provide capital for small to medium-sized B2B and B2G businesses. This fintech company is known for invoice factoring and servicing funding requests faster than most of its competitors. 

Pros 

• Fast and easy application process
• Funding decisions typically made within 24 hours
• 80% of production is from repeat customers
• No hard credit checks

Cons

• No funding for B2C companies
• Prefers personal FICO scores above 600
• Factoring transactions are full recourse

» MORE: BlueVine Business Loan Review

EasyFunding

EasyFunding is an online lender that can work with bad credit borrowers and finance medical practices. 

Pros

• High approval rates
• Works with bad credit
• Flexible payments
• Quick funding

 Cons

• Higher interest rates

Traditional Banks

Traditional bank loans may have lower interest rates but can be harder to qualify for. 

Pros 

• Low fixed interest rates
• Available for many uses
• Predictable monthly payments

Cons

• Difficult to qualify for
• Longer wait time
• Collateral may be required

Which business loan is right for your medical practice?

Determining which types of medical practice financing is right for your business will depend on several factors including what you can qualify for, how much money you need, what loan terms you’re comfortable with, what you want to use the money for and what works best for your business. Once you consider these factors, you will be able to decide on an option that’s best suited to your needs.

When you determine which type of lender and loan are right for you, compare two or three similar options based on the APR which includes loan fees and interest rates. The one with the lowest APR should be a priority.

How to qualify for a medical practice business loan

To qualify for most types of medical practice financing, you will need to show strong business history and a high credit score. The majority of lenders will want to see that you have been in business for 1-2 years and that you have an annual income that ranges from $50,000 to $250,000. This can be challenging for businesses that are just starting out and if you can’t meet these qualifications, you may have to consider other funding options.

If your credit score is low, that may work against you, but there are things you can do to bring your score up. These include paying off your debt and looking at your credit report to see if there are any mistakes that have been made. Correcting these mistakes can raise your score. If you do not qualify for a business loan, you should consider a personal loan to get funding in the meantime.

How to apply for medical practice financing

Once you find a lender and the type of loan that’s right for you, you will need to meet or contact the lender. They will let you know what’s required moving forward. To expedite the point of determining which loan and lender are best for you, you can use PrimeRates to check offers within minutes.

Once you are pre-qualified for a loan and ready to move forward, you should be prepared. Most lenders are likely to ask you for documentation such as financial statements, income taxes, proof of credit score, and more.

Conclusion

Using an online lender can be an efficient way to secure funding for a medical practice loan. PrimeRates.com provides an online platform for you to shop and compare offers. 

 

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