When it comes to a medical practice startup, it pays to understand the process of getting bank loans for doctors.
You may want to start a practice to gain more control over your income or spend more time with your family. Regardless of your motivation, follow our practical guide with tips on how to get medical practice loans.
What Are Medical Practice Loans?
In any business, it takes financing to start a new venture — the same is true in the medical field. Medical practice loans are forms of business financing that family physicians or doctors of any specialty can use in order to open or operate a medical office.
Medical practice loans provide working capital that allows doctors and medical teams to:
- Start a new practice.
- Purchase equipment, inventory, and supplies.
- Buy real estate or expand current capabilities.
- Merge with or acquire an existing practice.
- Refinance current business debt.
- Advertise and acquire new patients.
- Pay salaries and benefits packages for new hires.
Different Types of Medical Practice Loans
Various medical practice loans can provide the financing required to start a practice. Lenders range from banks and credit unions to private investors and wealthy backers. The most common medical practice loans include:
- Traditional bank loans
- U.S. Small Business Administration (SBA) 7(a) loans
- Term loans
- Business line of credit
- Equipment financing
Tips on How to Get a Medical Practice Loan
Many details are involved in a medical startup, and financing is one of the most critical. If you plan to finance your startup through a bank or another financial lender, here are a few tips to consider.
1. Allow Sufficient Time for a Bank Loan
While a bank may lead you to believe you can get approval for a loan in less than two weeks, this is usually not the case. This unrealistic expectation can certainly throw a wrench into your startup timing. For this reason, begin the process of securing financing as soon as possible.
2. Gather Business Financial Documents
Prepare all relevant financial documents. Depending on the lender, required paperwork could include:
- Business plan and balance sheet
- Bank statements and income statements
- Personal and business tax returns for at least two years
- Relevant licenses and articles of incorporation
- Financial projections
- Current commercial lease agreements
3. Remember That Personal Credit Matters
Banks and other lenders are very interested in your personal credit. You don’t necessarily have to have a lot of available capital — yet it is crucial that you don’t have a poor credit history. You must also demonstrate an ability to generate money and not spend excessively.
4. Calculate How Much You Need to Borrow
Understanding your borrowing requirements lends credibility to your loan application. It’s also essential to understand as early as possible how much you need and can afford to repay down the line.
To calculate the amount you need to borrow for your medical startup, take the following steps:
- Identify your requirements, including monthly expenses for your startup.
- Estimate costs from contractors and suppliers.
- Assess your current financial situation, including any other loans or debt.
- Consult a financial consulting firm specializing in medical accounting services.
5. Beware Vacillating Lending Trends
Lending trends fluctuate when it comes to medical practice loans. There are times when medical practice startups are “in favor” as a lending risk and sometimes not. Changeable trends and your personal and business financial health can impact repayment terms, borrowing limits, and medical practice loan rates. This can also affect the timing of your startup plans.
6. Keep in Mind That “Yes” Doesn’t Necessarily Mean “Yes”
When a bank says, “Let’s move forward,” that does not necessarily mean you are approved. A bank may be ready to “move forward” with the process, but final approval could still take months. During this process, it’s important to stay patient and follow up with the bank if needed.
7. Consider Partnering With a More Experienced Practitioner
While you may want to start your own practice right away, there are some special considerations for recent medical school graduates. If you have substantial outstanding student loan debt or insufficient industry experience, you may have to compensate for that lack of experience.
Most lenders, especially those offering SBA loans, may require that you use an outside management firm or partner with a more experienced practitioner.
Need Guidance on Medical Practice Loans?
Are you considering starting your own practice? DoctorsManagement, LLC has helped many medical providers start off on the right foot, and we are happy to help you, too! Our medical practice startup consultants can facilitate the process. We can even help with a presentation for a bank loan that clearly shows that you’re positioned for success.
Contact us online or call us with your startup questions.