Business Loans for Healthcare Professionals

What are business loans for healthcare professionals?

A business loan for healthcare professionals is any business loan that can be used for the healthcare sector - which is almost all of them.

There are a range of financial options available, but the traditional loan is a lump sum you borrow and pay back, plus interest, in the following months or years, depending on the term. Since healthcare is such a reliable business to be in, lenders tend to be keener to lend to businesses in this industry, provided they meet their minimum requirements.

Any healthcare professional with a business can use a business loan, though healthcare professionals known to make more will usually have an easier time acquiring the funding they’re looking for. Some of the healthcare professionals that commonly use business loans are:

• General practitioners
• Plastic surgeons
• Dentists
• Psychiatrists
• Physical therapists
• Podiatrists
• Pharmacists
• Chiropractors
• Dieticians
• Prosthetic professionals

Common reasons for using a healthcare business loan

Many healthcare professionals use a business loan to:

• Purchase or expand a practice
• Purchase new equipment
• Hire new staff
• Pay for marketing
• Do additional training
• Train staff
• Renovate their practice

Types of business loans for healthcare professionals

Bank Loans: Bank loans are typically the hardest form of business loan to get because banks have the strictest requirements, but healthcare is definitely a sector that’s more likely to see success here. Bank loans can be attractive because they offer low interest rates, typically 2-5%. They also usually have longer repayment terms, around 5-10 years and longer if you’re looking to purchase real estate. The downside apart from the stricter requirements is the application process often takes weeks or months.

SBA Loans: SBA loans are guaranteed by the Small Business Administration, and so are generally easier to get than bank loans because the lender knows the SBA will cover the value of the loan if you default. They also offer attractive terms and rates of 2.89% - 13%. While they are easier to get than bank loans, they still have strict requirements and due to the popularity of these loans, it can take up to 12 weeks to get approved.

Term Loans: Term loans offer the same traditional structure as the two above types of business loan (you get a lump sum and pay it back with a monthly payment) but are offered by online lenders. While interest rates tend to be higher and terms a little shorter, the application process is fast and you usually get funding within 14 days of starting your application.

Merchant Cash Advance: If you are in an area of healthcare where you take a lot of your payments through a card processor, you may be able to get a merchant cash advance through the company that processes your transactions. This is a good option if you don’t have a stellar credit history because they usually make a decision based solely on the transactions they process for you.

With a merchant cash advance you receive a lump sum the same way as other loans, but instead of paying it back with a fixed monthly payment, a percentage of every transaction they process for you goes toward paying it off. This often makes paying back a merchant cash advance fast, but you need to do the math beforehand and make sure it’s not going to leave you struggling to run your business.

Equipment Financing: If you need to purchase equipment, you may be able to use equipment financing. This is where the equipment acts as collateral for the loan, and so you can often get lower interest rates. The downside is that if you get into financial difficulty, the equipment will be seized and so you may find yourself without essential equipment.

Invoice Financing: If you are in an area where you invoice for large expenses, such as cosmetic surgery, you may be able to use invoice financing. This is where you borrow the money on an invoice you’ve sent to a client from a third party company and pay it back when your client pays you. This won’t be suitable for many areas of healthcare, but if you have large invoices and often find yourself waiting to be paid, this can be a good option.

Peer-to-Peer Financing: If you’re worried you won’t qualify for a traditional loan, you can look into peer-to-peer lending. This is where you set up a campaign on a peer-to-peer lending site and ask individual small investors to “fund” your loan. If an investor thinks you’re likely to pay your loan back diligently, they will put some money toward the total loan amount. Once fully funded, you’ll pay it back monthly plus interest, like any other loan. Terms tend to be shorter here and interest rates higher since individuals are risking their money, but it’s a good alternative to traditional loans for some.

Are there alternatives to business loans for healthcare professionals?

If a loan isn’t right for you, a few alternative forms of financing are:

• Business Credit Card: Works like a personal credit card but can be used for business expenses. This is a good option if you need to smooth cash flow and make small purchases.
• Business Line of Credit: This works like a credit card in that you have a credit limit and can use anything up to that limit, and only pay interest on what you’ve used. The difference is instead of being linked to a card, you can pull money from the line of credit whenever you need it. In most cases, this credit is revolving which means you can use it again once you’ve paid it back.
• Crowdfunding: If you’re looking to do something that will greatly benefit your local community or a certain group of people, you may be able to consider running a crowdfunding campaign. If successful, you’ll be able to seek the funding from the community you plan to serve (or well wishers) and you won’t have to pay anything back.