Medical practice loans serve as vital financial instruments for businesses operating within the healthcare sector. These specialized loans cater to the unique financial needs of both nascent and well-established medical practices. They empower healthcare providers to make crucial investments in essential medical equipment, enabling them to deliver high-quality patient care—and even to attract new clients through marketing initiatives or facility upgrades.
Medical practice loans offer the financial flexibility necessary for healthcare businesses to thrive, innovate, and consistently meet the evolving healthcare demands of their communities. This guide will explain the benefits of healthcare practice loans, as well as the types of loans available to medical professionals.
What is a medical practice loan?
A medical practice loan is a type of loan designed to provide healthcare professionals with the funding they need to operate and grow a medical service business. These loans can also help finance the acquisition or purchase of an existing practice.
Healthcare professionals typically use medical practice loans to cover expansion-related costs, cash flow fluctuations, medical equipment, office renovations, software programs, and more.
The total amount that companies can borrow for medical practice loans varies by lender. Usually, the minimum amount is $25,000 or less, and loan amounts could go as high as a $10M loan or more.
How can you use a medical practice loan?
Medical practice loans can be used in a variety of ways to help you operate and grow your business. You can use a physician practice loan for things like covering important costs for a new business, purchasing equipment, acquiring an existing business, or promoting your medical practice.
Here are some common examples of how professionals who take out a medical loan use the funds:
- Equipment purchases: Medical equipment is one of the biggest expenses associated with owning a practice. If you’re purchasing a larger item, such as an X-ray machine, retinal scanner, or even an ambulatory vehicle, you’ll likely need help footing the bill.
- Acquire existing medical practice: If you’re not up for the heavy lifting that comes with launching a medical practice for the first time, you can acquire an existing business. It can be expensive, but a medical practice loan can make the cost more manageable.
- Advertising to new customers: Even after you’ve opened the doors of your new medical practice, you can’t expect patients to simply stroll in. You may want to consider investing in social media campaigns, hosting events, Google Ads, search engine optimization (SEO), and more.
- Salary and benefits: You’ll likely need to hire other medical professionals, office employees, or even a secretary to assist you. A medical practice loan can help you cover the basic costs associated with hiring and paying your employees.
- Business debt refinancing: If you’ve taken out debt in the past to launch your medical practice or cover its operating costs, you may be able to refinance and secure a lower interest rate or more manageable payment. Refinancing business debt can sometimes help you save money and maybe even pay off the debt faster.
- Office upgrades and renovations – Whether your medical practice has been in business for a little over a year or more than two decades, there might come a time when you want to make changes to the physical layout or design of your office space. A medical loan gives you the flexibility to add extra exam rooms or upgrade areas.
What are the restrictions on medical practice loans?
Many medical professionals apply for general business loans, rather than those geared specifically towards people in the healthcare industry. If you go this route, you don’t need any special credentials regarding your practice — you just need to provide standard details about your finances.
However, if you are applying for a dedicated health professional loan, there will be different requirements you must meet. For example, your lender may ask to review your medical license and the type of medical practice you operate. This is in addition to your business licenses and personal information.
How do medical practice loans work?
Before you apply for a medical practice loan, you need to know how business loans work. That’s because a medical loan is similar to other types of business loans, even though it is for a medical practice.
The first step in applying for any business loan is to find a lender. National Business Capital is a great place to look, and getting a quote from National Business Capital could help you find affordable funding solutions.
You’ll also want to ensure you review specific requirements for any lender and understand total loan terms and costs.
Next, you’ll gather your personal and financial information. If you’re already operating a business, you’ll also need to provide specific information and financials about your existing medical practice. If you plan on buying another business, you’ll need information about that practice.
Once you apply, if you meet your lender’s requirements, you should hopefully be approved for funding.
The amount of time it takes to process your application and receive your funds will largely depend on the type of lender you’re working with. Banks are often known for having stricter requirements and slower processing times. Private credit lenders, on the other hand, can be more lenient and faster at depositing funds.
Who can apply for medical practice loans?
Unlike most types of business loans that any company can apply for, medical practice loans are restricted to people operating within the healthcare industry.
Some examples of different kinds of businesses that have been approved for a medical loan include:
- Physicians
- Plastic surgeons
- Psychologists and psychiatric professionals
- Chiropractors
- Eye doctors
- Nurse practitioners
- Pediatricians
- Dermatologists
- Wellness professionals
- Home healthcare
- Therapists
Other types of healthcare professionals could potentially qualify as well. Medical business loans can be used for a large variety of healthcare and wellness businesses, so if you suspect you may qualify, it’s worth reaching out to a lender to find out.
Types of medical practice loans
There are different kinds of medical practice loans that you can consider, including the following.
1. Term loans
Term loans may be secured or unsecured loans, although most are unsecured and don’t require collateral. They come with a set repayment term, such as 5, 10, 15, or 20 years, depending on the lender and loan amount.
When you get a term loan, you borrow a set amount up front, such as $5M or $10M. You make payments on a predetermined schedule designed to fully repay principal and interest during the life of your loan.
Funds can be used for almost anything you’d like, including funding short-term, mid-range, and long-term goals.
2. Business lines of credit
A business line of credit is similar in some ways to a credit card because you are granted access to a line of credit and can borrow up to your credit limit, but you don’t have to borrow the full amount at once.
You can pull money from your line of credit as needed and won’t make payments on funds you haven’t borrowed. You can also draw from your line of credit repeatedly as you pay down what you owe.
3. Equipment financing
Equipment financing is a loan to finance specific kinds of equipment, such as an EKG machine or other medical tools and devices.
The equipment usually acts as collateral for the loan, and you pay off the balance over time on a set repayment schedule. Equipment financing can make it easier to afford expensive items your practice needs and pay them off over time.
4. Cash flow financing
Cash flow financing provides funding based on your practice’s expected future revenue rather than your current assets or credit history. Lenders advance funds against your practice’s anticipated income, such as insurance reimbursements or patient payments.
Repayment terms are typically shorter than traditional term loans – usually between 3 and 24 months – with daily or weekly payment schedules that align with your revenue cycle. This type of financing can help cover growth-related expenses, equipment replacements, inventory purchases, and more without disrupting your practice’s day-to-day operations.
Types of business loan providers for healthcare professionals
In addition to choosing the type of loan, you can also choose what kind of lender you want to work with to get your medical practice loan.
Private lenders
Private lenders are often more lenient when it comes to borrowing requirements and are also more likely to fund companies during all phases of their medical practice.
They also have a wide range of lending products, such as term loans, lines of credit, cash flow financing, and more. Plus, private lenders are known for having faster processing times.
Banks and credit unions
Banks and credit unions can offer lower interest rates and favorable terms. You can find a variety of loan products at these types of institutions, including term loans, business lines of credit, equipment financing, and more.
Despite the benefits, these institutions have strict lending requirements that may exclude some businesses from funding, especially if you’re just starting your medical practice.
To qualify for a loan from a bank or credit union, you will usually need good credit, a minimum of two years of business history, strong revenue, and potentially even collateral.
Banks and credit unions also have longer application processes, and they may not be ideal if you need funding fast.
Small Business Administration (SBA)
The SBA offers multiple financing products through participating lenders.
Participating lenders can be found online or through local banks and organizations. SBA loans feature low-interest rates, high funding amounts, long terms, and can be used for a large range of business expenses.
The downside to SBA loans is that they can be quite difficult to qualify for – not to mention the slow processing and approval timelines that delay your funding. You’ll need good credit, at least two years of business history, and you must be able to meet the SBA’s standards for your business size.
| Type of lender | Description |
| Private credit lenders | Often operate online, providing more flexibility in funding. |
| Banks and credit unions | Local and convenient, but they often have strict lending requirements. |
| Small Business Administration (SBA) | Large loan limits and affordable loan amounts, but strict lending requirements are set by the government |
How to get medical practice financing
As mentioned above, looking for medical practice lenders is a good place to start your borrowing journey. However, there are a few steps you should take even before that. Here’s the entire process to help you understand what’s involved in getting a loan.
1. Determine your needs
You don’t want to borrow more than you need and end up paying extra interest, nor do you want to borrow less and experience a continued financial shortfall.
To avoid this, start by identifying your goals for the borrowed capital and researching the costs of achieving them. For example, if you plan to finance a new piece of equipment, find out exactly how much it will cost.
You should also review your company’s financial records and take note of all your expenses, how they change from month to month, and how your cash flow covers each one to determine a safe level of debt to take on.
2. Research and compare lenders
Search for lenders that will be willing to work with you, taking into consideration their offered programs, reputation, and qualifications.
You want to make sure you can meet the lender’s eligibility requirements, that the loan amounts they are offering are aligned with the amount you need to borrow, and that the repayment terms are reasonable.
You should also compare interest rates and fees to ensure the loan you choose is affordable.
3. Gather necessary documentation
While the specific documents you’ll need will depend on the lender you’re working with, you should prepare certain documents to prove you meet loan requirements, including the following:
- Business financials, including balance sheets, bank statements, tax returns, and more
- Credit scores
- Availability of collateral
- Legal documents, including business licenses, medical licenses, and registrations
- Personal financial history, including bankruptcy or existing liens
4. Submit and wait for approval
After submitting, the next step is to wait for approval. Sometimes, this comes quickly, but other times the lender has more underwriting steps to take and more processing requirements, and it could take several weeks.
Choose National Business Capital for medical practice loans
If you are ready to apply for a medical practice loan from a trusted lender that has helped many in the medical industry secure funding and operate thriving businesses, get started today.
National Business Capital offers a variety of medical practice loan options to help your business grow and thrive. You can connect with expert business advisors to help you explore your funding options, find the right loan program to meet your goals, and move through the application process.
Apply now with National Business Capital to see the financing options available to take your practice to the next level.
Frequently asked questions
Medical practice financing allows medical businesses to quickly secure funding to solve challenges, invest in growth, and keep up with competitors.
You can purchase new equipment to bring your practice to the latest technological standard, start a marketing campaign to attract new patients, or renovate your waiting area to accommodate more clients at a time – the choice is up to you.
Medical practice financing offers many benefits. A few of the most prominent include a streamlined cash flow, increased purchasing power, an ability to quickly take advantage of growth opportunities (including upgrading equipment), and a freedom to grow your practice as you choose.
Whether you secure a lump sum of funds or establish a line of credit to draw funds from as needed, this type of medical practice loan can help set your business up for a positive experience going forward.
The interest rate on medical practice loans varies depending on economic conditions, the borrower’s financial credentials, and demand for credit. Those who want to borrow should shop around to get multiple quotes to find the best rate for their situation.
ABOUT THE AUTHOR
