Maybe you want to be your own boss, partner with a hand-picked group of medical colleagues, or practice closer to the patient communities you serve. Whatever your reasons, you’ve chosen to start your own medical practice. And for that, you should be commended.
Find Your Financing
According to the American Medical Association (AMA), only 44% of physicians in the U.S. were self-employed in 2020. That’s the latest figure in a continuous 10-year downward trend of privately owned physician practices. And yet, there remain independently-minded physicians who recognize the value of private ownership—both to themselves and their patients—and courageously forge their own paths forward as medical entrepreneurs.
If you’ve reached the point where you’re considering financing options for your practice, that means you’ve likely come a long way already. Perhaps you’ve determined who your patient base will be, where you’ll locate your office (or offices), and how you will grow your practice. Even if you’re still in the process of working out these essentials, exploring financing options now is a great idea.
Set Your Financial House Up for Success
Loans and/or lines of credit are likely in your future if you’re starting up your own medical practice. The first thing you should do when considering financing options is to make sure you are a solid prospect in the eyes of lending institutions.
- Build up your credit before applying for any loans.
- Review your credit reports carefully to ensure they are accurate and error-free.
- Pay down or pay off any outstanding debts you currently have.
- Putting your financial house in order will help make you more attractive to lenders and more likely to secure funding with favorable terms and interest rates.
- A solid, well thought-out business plan goes a long way in helping you secure appropriate financing.
- Banks and credit unions will consider the projected financial performance of a new practice when making lending decisions, in addition to credit history and area of medical specialization.
Explore your financing options
Practicing medicine on your own is complicated but finding funding for it doesn’t have to be. There are numerous options available to help you secure the financing you need for your medical startup. Here’s a brief overview of some of the most common ones.
From medical records systems in the office to MRI machines in diagnostic suites, expensive equipment purchases come with the territory, no matter your medical specialty. An equipment financing loan is a great option that allows you to use the equipment you purchase as collateral for the loan itself. This reduces the risk to both you and the lender since you don’t have to put up any personal assets as collateral and the lender secures the loan with the equipment. These loans are often easier to qualify for than term loans and you won’t have to pay the full cost of the equipment upfront. Depending on the circumstances, you may even be able to negotiate a loan from the company that manufactures the equipment and structure the deal as a lease.
Secured lines of credit
Establishing a secured line of credit with a bank or credit union gives you access to funds up to a certain limit that you can use for a variety of expenses beyond just the purchase of equipment. However, a secured line of credit must be guaranteed by collateral you put up, such as your home, vehicle, securities, or a similarly valuable asset.
Another flexible option is a term loan with a fixed interest rate. With these loans, you get cash up front that allows you to cover expenses such as equipment, operating costs, space rental, and payments to vendors. These loans typically have shorter repayment periods, however, making them best for practices that expect to quickly achieve the necessary positive cash flow to begin paying the loan back.
Unsecured funding (loans and lines of credit)
Like secured loans and lines of credit, unsecured options provide you with funds up to a certain limit based on your personal creditworthiness. The difference with unsecured funding options is you don’t have to put up any collateral as a guarantee, which reduces some of your risk. Approval is generally a fast and easy process and loans and lines of credit can be found at extremely competitive interest rates. Medical professionals typically qualify for preferred rates and terms. In the case of unsecured lines of credit, you can utilize and repay those funds on a revolving basis. And unsecured loans are usually available at fixed interest rates with no prepayment penalties.
“My experience with obtaining funding via large financing corporations for my career needs involves being flooded by emails and phone calls as a result of one inquiry. These intrusions continued for years. Our customers appreciate our personal touch that stems from our past experiences and desire to not be intrusive and obtain the end goal with respect to our customers’ time” – Alan Savoy, MD and UFS Partner
What about SBA loans?
A small business administration (SBA) loan is a flexible financing option that can cover a wide variety of expenses beyond just the purchase of equipment. Though the 7(a) loan is the most popular type of SBA, there are strict guidelines around how to apply and who qualifies. In addition to a rock-solid credit background and demonstrated steady finances, potential borrowers need 4 years of business history to secure the loan. For this reason, an SBA (7a) loan is not a great option for startups.
You don’t have to do it alone
For many medical startups, unsecured loans and lines of credit make the most sense because they can be low-risk, collateral-free, and easy to obtain with preferred rates. Whatever financing you ultimately choose, it pays to have expert guidance to help you navigate through your available options. UFS has over 15 years of startup funding experience and has helped clients gain access to $450,000 or more at interest rates that start around 6%. Learn more about your new Medical Practice loan options here!