Disclaimer: Information in the Business Financing Blog is provided for general information only, does not constitute financial advice, and does not necessarily describe Biz2Credit commercial financing products. In fact, information in the Business Financing Blog often covers financial products that Biz2Credit does not currently offer.

Most doctors and other medical professionals typically need to finance their practices because of the high cost of medical equipment, leasing or purchasing specialized real estate and office space to provide patient care, and overhead.

Most medical practices turn to popular doctors loan types and providers to finance different aspects of their operations. Here are five of the most common, along with information on what they can be used for and how to secure them.

5 Popular Doctors Loan Options for Medical Practices

Loans for healthcare operations are not all created equal. Here is an overview of five of the most common doctors loan types so you can select ones that meet your needs and financial situation.

1. Small Business Administration (SBA) Loan

Small Business Administration Loans are the most common type of business loan for doctors. There are several types of SBA loans that medical professionals can choose from. It all depends on what you need funds for. Let’s take a look at SBA 504 & SBA 7(a) loans, two types medical professionals often apply for.

• SBA 504 loan. If you need a small business loan to buy commercial real estate, medical machinery, or equipment for your practice, an SBA 504 loan could be the best choice.
• SBA 7A loan. If you are purchasing a practice or need working capital, consider the SBA 7A loan.

What makes these and other Small Business Administration loans attractive is that they are backed, within limits, by the federal government. This added layer of protection reduces risk for lenders. Typically, if with a good business credit report and personal credit score, small business owners should be able to qualify for a loan from the Small Business Administration.

You need to apply for SBA loans through lenders approved by the loan program. You can find one on the Small Business Administration website.

2. Doctors Loans from Traditional Lenders

Medical practitioners can also apply for loans through traditional institutions, such as banks, to access various funding options.

Most bank loans are term loans. With a term loan, you borrow a specific amount of money and pay it back over a predetermined amount of time in equal monthly payments through a repayment schedule with a set interest rate.

A term loan is what most people think of when considering financing options. These are the most common types of loans for healthcare practices and other small businesses.

Most national and regional banks offer loans and other financing options tailored to medical professionals.

Some things banks can do to help set up financing for healthcare providers include:

• Coming up with 100 percent financing options requiring no down payment or upfront costs
• Supplying a dedicated agent that specializes in medical professional loans that works with you through all parts of the financing process
• Offering access to preferred interest rates, which could be available if you are an AMA (American Medical Association) or ADA (American Dental Association) member.

Be aware that traditional banks can be a relatively expensive medical financing option. They typically take into account personal credit and business credit history — and the overall financial health of the business — when evaluating loan eligibility. Personal credit is a critical consideration for traditional lenders when loaning money to businesses in professional industries like medicine or law. That’s because practitioners are central to a business's success.

3. Doctors Loans from Non-Traditional Lenders

Non-traditional lenders are medical loan providers that typically offer less hands-on service than traditional lenders but deliver a faster, more seamless, techno-centric loan application and approval process. This is particularly valuable for medical practices that want a speedy loan application process so they can get access to cash fast.

Non-traditional lenders usually conduct business online. Some online doctors loan lenders can provide small amounts of money relatively quickly, sometimes within one business day. Depending on their loan application and decision-making process, it may take longer to be approved for larger amounts of cash.

Non-traditional lenders typically streamline their doctors loan application processes. They make uploading documents like business and personal financial statements, credit reports, tax returns, bank statements, and business plans easy. The best online lenders make it possible to bypass much of this, along with filling out forms, because their systems make it easy to connect directly with your bank account or other financial institution through the application process.

Interest rates from nontraditional doctors loan providers are typically lower than those of traditional ones because their overhead is less.

As with most medical loan providers, interest rates depend on whether the loan is secured or unsecured, with secured loans usually having lower interest rates. By securing the loan with business collateral or personal assets (such as real estate or securities), you help minimize a lender’s risk because the collateral helps ensure the business financing will be repaid.

Similar to other lenders, non-traditional ones also review applicants’ credit scores to determine the interest rate. The better the credit score, the lower the interest rate an individual can obtain. (The inverse is also true. People with bad credit scores will pay higher interest rates.) The loan term — or period to repay a loan — depends on the loan amount and what it will be used for.

4. Business Line of Credit for Healthcare Practices

A business line of credit is a very different type of financing than a term loan.

A line of credit offers you a set amount of capital you can withdraw up to a defined limit, and you only pay interest on money you borrow. Once you pay back what you borrow, you can borrow it again. Let’s say you secure a $50,000 line of credit and use $15,000. Once you repay that $15,000 principal (plus required interest, either over time or through a lump-sum payment), you can access the entire $50,000 again. In this way, a business line of credit can be thought of as similar to a credit card.

Business lines of credit are ideal for helping with cash flow issues, operating costs, and other short-term financing needs. They provide easier access to cash than short-term loans and are less risky than merchant cash advances and other quick cash options.

5. Medical Equipment Financing

Are you interested in purchasing new medical equipment and need cash to do so? In the rapidly changing healthcare industry, this is common. If so, equipment financing could be the ideal option.

Equipment financing is one of the easiest medical loan options to qualify for, and it comes with relatively low interest rates. That’s because the equipment itself serves as collateral to back the loan. In other words, if you cannot repay the loan, the company that provides the financing, often the manufacturer or seller, can seize the equipment. Loan terms are closely related to the expected lifespan of the equipment.

Equipment financing is particularly popular with medical practices, especially new ones. Start-up costs for equipment can run into hundreds of thousands of dollars, and equipment financing is one of the only ways new medical practitioners can pay for necessary equipment purchases.

Final Thoughts on Business Loans for Doctors

Whether you’re starting a practice, purchasing an existing practice, expanding, doing renovations, buying new equipment, or making improvements, you can secure financing to achieve your business goals in many ways. Leverage the information in this guide to ensure you get the right doctors loan for you from the best possible provider. It will help secure appropriate financing at the best possible interest rate at fair terms.

Frequently Asked Questions (FAQs) About Professional Loans for Doctors

What is the best doctor loan program for medical practices?

There is no single best type of doctor loan. What’s critical is to understand what you need financing for and explore your options to determine the type of loan and provider best aligned with your needs. Always compare different business loans for healthcare professionals to find the best interest rates and repayment terms for you.

Is seeking medical equipment financing from a traditional bank or a non-traditional lender better?

Traditional loan companies provide a personal touch, but their application process is relatively cumbersome and slow, and interest rates tend to be higher. Online lenders typically don’t offer as much one-on-one support for medical business loans. Still, their application processes are relatively quick and easy, and interest rates are often lower than those of traditional institutions.

What kind of financing can I get to buy medical equipment?

Equipment loans may be the best financing option for purchasing medical equipment. They are typically easy to qualify for, even for new physicians, because the equipment backs the loans. They also come with relatively low interest rates.

What are the best loans for new medical practices?

Doctors just starting out after medical school often need to purchase a significant amount of equipment quickly. That makes equipment loans popular choices for them. They’re easy to qualify for and come with relatively low interest rates. Loans from non-traditional lenders can also be a smart option for new practices.

Can I trust medical practice financing from non-traditional lenders?

Absolutely. Online lenders are typically as reputable and dependable as traditional banks. What’s critical is that you do your due diligence, request loan offers from several providers, and compare them to ensure you select the ideal lending package from the best provider for your medical practice.