The Executive Suite: Six medical practice funding and physician business loan options

Whether you’re opening a private practice, supplementing your cash flow, or expanding your offices, medical practices of all sizes and specialties can benefit from an infusion of working capital.

Between traditional SBA and bank loans and new forms of alternative funding, it can be difficult to determine what medical practice funding is best for you. Keep reading to learn more about 6 of the most popular physician business loans.

1. Small Business Administration (SBA) loans

SBA loans are not actually provided by the SBA—they are disbursed by partnering banks and guaranteed up to 85% by the SBA. Multiple SBA loan options exist, including the popular 7(a) Guaranteed Loan program, microloans, express loans, and 504 Local Development Company Program loans.

SBA loans typically offer the lowest rates, longest terms, and largest loan amounts (up to $5M), making them the preferred option for many physicians. However, these loans are the most difficult to acquire with the longest application process and extensive paperwork requirements, including years of detailed business and personal financial documentation. Collateral or a personal guarantee are typically also required.

SBA loans are ideal for

Business owners with exceptionally strong credit seeking a long-term loan

2. Bank loans

Bank loans may be easier to acquire than SBA loans, especially if you have an existing relationship with a lender. Terms and rates are competitive and typically depend on the size of the loan; however, similar to SBA, it may take weeks or longer to learn whether you’ve been approved, and approval is never guaranteed. Collateral or a personal guarantee is often required.

Some lenders, including Wells Fargo and Bank of America, offer funding options designed specifically for doctors. These loans consider the unique profile of medical practices, including factors like student debt or low cash reserves.

Bank loans are ideal for:

Start-ups looking for customized funding that considers unique circumstances like student debt
Established, larger practices with strong financial histories and a clear idea of how they’ll use their funding

3. Merchant cash advance

A merchant cash advance (MCA) is a non-loan form of financing that is available from alternative lenders, including direct online lenders like Greenbox Capital®, OnDeck, and Kabbage. With an MCA, a business is granted a cash advance in exchange for a percentage of their daily or weekly debit and credit card sales until the advance has been repaid.

Rates may be higher than traditional forms of funding, but lending requirements are more flexible and the application process is significantly streamlined. Approvals are based on the overall health of your practice, not just your credit records and financial history. In some cases, approval can even be made in as little as one business day.

Merchant cash advances are ideal for:

Businesses who need immediate funding or fast access to working capital
Businesses seeking smaller loan amounts and shorter terms
Businesses who would not be approved by traditional lenders, such as businesses with low credit scores

4. Business lines of credit

Lines of credit are available from traditional banks and alternative lenders. They function similarly to a business credit card, but typically for longer terms and with larger limits.

Lines of credit offer the most flexibility, allowing you to draw and repay from the line whenever needed. You only ever pay interest on the amount borrowed.

Lines of credit are ideal for:

Business with a strong credit history who want a cushion to fill cash flow shortages
Businesses who need flexible access to working capital

5. Practice acquisition loans

Practice acquisition loans are designed specifically for the purpose of acquiring another practice, including purchasing a retiring doctor’s practice, purchasing a share of a practice or a partnership stake, or expanding your existing practice.

Some lenders, including Wells Fargo and the Bank of America, offer specific lending programs designed for doctors looking to purchase an existing practice. Collateral or a personal guarantee are required.

Practice acquisition loans are ideal for:
Established businesses with strong financial histories who are looking to expand to a new location
Start-ups looking to purchase an existing practice from a retiring physician

6. Equipment financing

Medical equipment can be expensive to purchase and repair. Equipment financing is designed to finance the purchase or repair of medical equipment, such as imaging machines, diagnostic equipment, lab equipment, exam tables, computers, wheelchairs, and more.

The equipment serves as collateral, and terms will typically match the lifespan of the equipment. A down payment may be required.

Equipment financing is ideal for: