Lack of access to capital can affect the growth and success of a thriving medical practice. In fact, a staggering 31% of small businesses fail to secure adequate financing. As a result, alternative sources of SMB financing are replacing traditional banks. Healthcare lenders are also increasing the scope of asset-related financing offerings. This article will cover some of the most common financing options for medical practices. Read on for more information.
SBA loans
Aside from the startup costs, medical business financing can help with other important costs, such as hiring staff and renovating or leasing a building. A well-designed and inviting space can help patients relax and feel comfortable, so medical practice loans can be helpful for these costs. However, a medical practice may not qualify for official business loans, so it's important to know your business model and develop a solid plan for low-cost financing before applying for financing.
For example, a medical practice may need new equipment, updated software, or more employees. Another important use of a medical practice loan is for paying off high-interest debt. Refinancing can help with these needs as well, but it's important to choose the lowest-cost funds and the longest terms. SBA loans, also known as SBA Express loans, are the "gold standard" for business loans and can offer a low-interest rate and long-term term.
Business lines of credit
Many medical practices benefit from business lines of credit to help pay for the costs of running their practice. These loans work similarly to credit cards and are ideal for short-term needs. However, the amount of funding available to medical practices can vary depending on the practice's needs and the amount of accounts receivable. Some businesses choose to use business lines of credit to pay for vacations or equipment. Here are some tips for applying for medical practice lines of credit.
A business line of credit allows a medical practice to borrow funds against a predetermined amount. The amount can be drawn against as needed. This means that a medical practice doesn't have to spend all of the available funds in a single month, and can borrow money only if they need it. Since the money can be withdrawn at any time, the line of credit is flexible and cost-effective. It also comes in handy if unexpected expenses arise and there's a sudden surge in patient volume.
Equipment financing
Medical practices often need financing to buy or lease equipment. While purchasing equipment requires regular installments, leasing it requires payments over a certain period of time. Leasing equipment also allows you to resell it once you've paid off the debt. Medical equipment financing through a bank can be a good option for smaller businesses that don't have a great credit score or have been in business for a few years. The application process for SBA loans is lengthy and may require a small down payment. Lenders may also require little to no collateral.
Equipment financing allows medical practices to keep their cash flow more stable and free up capital to make other necessary changes. With smaller monthly payments, they can focus on other changes, like software updates and personnel training, rather than putting their business at risk for large, one-time expenses. Once the equipment is in place, however, the practice can easily upgrade it with an application-only funding program. And if they decide to upgrade the equipment, they can easily move to a new one by extending the lease.
Staffing budget requirements
During the budgeting process, it is important to determine what is considered a significant item. Consider which revenue lines are managed by a single individual. If they are, separate the budget sections for each individual physician and office visit. Medical supplies can be distributed to the supervising nurse. Alternatively, you may decide to allocate all revenue lines to the supervising nurse. Once you have determined what is considered a significant item, you can divide it among the people who are responsible for controlling that line item.