How can I find financing for doctors?
When you’re opening up your medical practice, you have in mind a future of financial freedom – combined with the satisfaction of being your own boss. However, in the early months and years of your practice’s operation, you may find times when you want to expand your business but don’t have the cash on hand to do so. Even later down the road, when you’ve built your single location into a success but then want to open a couple of other satellite locations, you may find that your liquidity is not sufficient to bring about the expansion you want at the quality that you know your patients deserve. That is where merchant capital loans for doctors come in, giving you the chance to expand now and keep growing your business. Finding financing for doctors can involve a number of different approaches, beginning with traditional lenders and then moving to private sources as well as other solutions when needed.
How do medical practice loans for doctors and specialists work?
One type of merchant capital loans for doctors is a working capital advance, or MCA. You get a lump sum of cash upon approval, and you pay it back from your future revenues, whether from credit and debit card statements or from ACH deposits through checks or other third party payers. The approval process is quick, because all the lender looks for is your payment history through those methods. So long as you have a solid record, and your advance is less than $75,000, then you will not need to provide any other financials for your application process.
The downside of the WCA is the expense involved. You don’t have a monthly payment to make – instead, a set percentage of each day’s receipts goes to the lender, meaning that if you have a big day you pay more, but if you have a slow day you don’t pay as much – but the APR of this type of advance can run over 50 or 60%, or even higher. So you avoid a credit check, and you don’t have to personally guarantee the loan, but it costs a lot. It can be worthwhile, but those high costs are worth knowing. Do you need the flexibility that comes with not having to make another fixed monthly payment? Then the WCA could make a lot of sense. If you can qualify for a traditional loan or private lending at a lower cost of financing, and you can afford an additional monthly fixed payment, then you might want to consider a different path.
Who provides medical practices small business loans?
Banks and other lenders also provide traditional small business loans for doctors, with regular monthly payments and set interest rates. Approvals can take up to a week in some cases, and while you do have that new monthly obligation to budget for, in the clear majority of cases your cost of the loan will be significantly less. So while you might end up waiting a lightly longer time for this type of loan to close than you would have to wait for a WCA to end up in your business’ bank account, if you plan ahead, that week or so that you would have to wait will not end up being crucial for your bank.
When you’re looking at traditional business loans for doctors, of course, you’re looking at a slightly more rigorous approval process. Instead of just looking at your credit and debit card receipts, lenders will want to look at your medical practice’s bank statements, and your revenue reports to see that you have the money to add payments on this new loan to your existing budget. One reason for this is the expansion in regulations that have been placed on banks in the wake of the 2008 financial recession that happened, in large part, because of poor decision-making with regard to the extension of credit. However, another reason is that it does not make sense to take out financing that you do not have a realistic way to pay back on a fixed basis. That’s why the WCA came into existence – to help people who need to grow their business but who are not quite ready for another set payment in their budgets.
What can you use the funds from these loans for?
Adding new equipment and inventory
Expanding your advertising and marketing presence
Acquiring real estate for multiple locations
Taking care of outstanding obligations
Business growth and expansion
Additional merchant capital needs
How can I get qualified for a business loan or merchant capital advance?
Now, if you just opened your practice, you’re going to have a hard time qualifying for a business loan. Why? Even if you’re the best pediatrician in the city, you haven’t shown that you can manage a practice yet. Your manner with patients is definitely important – as are your skills in the area of diagnosis and treatment. However, running a business requires a different skill set.
Even if you think that running your family’s budget effectively is the same, running a business profitably is different; therefore, most lenders will want to see that you have operated your practice for at least a year before they issue a merchant capital loan to you. They don’t expect profitability for the whole time, but they do want to see that your revenues are building and that you’re working out the kinks of owning and operating your own business. Once you hit the one-year mark, that’s a good sign that your practice is here to stay. Even with some rough months in that year, if you show that you have a plan for expansion and that this plan has started to work, it is much easier to gain approval.
If you have other questions about taking out a business loan for your medical practice, contact us today. We look forward to helping you serve your community as a medical professional, and our network of lenders stands ready to help your practice go to the next level.