Opening your own medical practice is expensive. Doing it when you’re fresh out of medical school is nearly impossible without help. The average doctor begins their career with over $150,000 in student loan debt, and opening a new practice could add $100,000 to that in startup costs. Few college graduates have a quarter of a million dollars on hand to cover that.
So, whether you’re just starting out or looking for an opportunity to grow your practice, you may need to seek financing from banks and lending institutions. usually in the form of a medical loan or business line of credit. Either can help you get started or cover expenses after you’ve been open for a while. In this article, we’ll define each of these and explain how medical professionals can get the most out of their financing.
What is a medical practice loan?
Medical practice loans are loans specifically designed for medical professionals. These loans can be secured (collateral required) or unsecured, depending on the primary applicant’s creditworthiness. Of course, terms and conditions vary by lender. Medical practice loans can be used to open a new practice, expand an existing one, cover expenses, or purchase new equipment.
Fixed-rate, long-term installment loans with reasonable interest rates are a sensible way to handle medical practice financing if your monthly revenue is enough to cover the monthly loan repayments. This may not be the case right away with a startup practice, so make sure you have a solid business plan in place before applying for a medical practice loan.
Another option: business line of credit
A business line of credit is a more flexible alternative to medical practice loans because you are not required to take all of the money you’re approved for in one lump sum. Instead, you can make draws from your line of credit gradually as funds are needed. It’s also reusable after you’ve paid back the borrowed funds. The following types of medical professionals may find this appealing:
● Primary care physicians
● Pediatricians
● Plastic surgeons
● Psychologists
● Psychiatric professionals
● Dermatologists
● Podiatrists
● Optometrists/ophthalmologists
● Chiropractors
● Massage therapists/Reiki practitioners
Using a line of credit for medical practice financing
Medical practice loans make a lot of sense when you’re opening a new practice. A business line of credit is the flexible option you’ll need when it’s time to grow your business. The costs of expansion vary, so a business line of credit is a good fit because you can draw funds when you need them and pay them back over time.
Expansion isn’t the only way you can use a business line of credit for your medical practice. It can also help you cover day-to-day expenses, equipment upgrades, and inventory purchases. Some of these are variable costs, while others could come up as unexpected expenses. Keeping a business line of credit open ensures you’ll be able to cover all of them. Here’s a list of things you can use a line of credit for:
- Day-to-day operations
- Equipment upgrades (administrative, diagnostic, etc.)
- Inventory purchases
- Hiring
- Expansion to additional office
- Renovation to existing office
- Acquisition of another practice
- Marketing/advertising campaigns, community outreach
How to get a business line of credit for your medical practice
Most lenders require that your business is operating for at least two years before you can apply for a line of credit. Your practice also needs to be set up as a business entity, like an LLC or corporation. You’ll want to be in good standing with the Secretary of State, because your lender will check, and you’ll need to make sure you haven’t had any recent bankruptcies.Other common requirements with lenders are that your practice has at least $40,000 in monthly revenue and that you personally have a FICO credit score of 625 or better. Meeting these criteria should get you the best terms and conditions on a business line of credit, though requirements will vary by lender.
Expand your practice with a Bluevine Line of Credit.
