Getting financing for health care practices shouldn’t have to be as complicated as surgery. 

No matter what type of health care professional you are, you’re going to need state-of-the-art equipment, computers and office space to ensure a successful practice. 

A variety of medical practice loans exist that considers the unique needs and qualifications of health care professionals, such as high student debt, the fact that medical office revenue streams are more unique than other types of businesses, and irregular insurance payments.

Financial pressure ramped up on the US healthcare system during the COVID-19 pandemic, as many providers were forced to replace outdated equipment, expand their facilities and hire more professionals. Post pandemic, the demand for financing in this sector should be on the rise to tackle higher patient volumes and the need for new equipment and technology to accommodate new practice offerings, such as telehealth.

Given the need for financing, there are a lot of options out there. Healthcare financing, depending on the lender, can apply to (but is not limited to):

• Independent primary care physicians
• Ambulatory care facilities
• One room surgical facilities
• Specialists, such as orthopedists, ophthalmologists and podiatrists
• Optometrists
• Veterinarians
• Dentists
• Mental health professionals
• Chiropractors
• Alternative medicine specialists
• Licensed masseuses 

Types of medical practice financing include:

Alternative Lenders Such as Helix Healthcare Financing

If you’re a health care practitioner that needs financing, there are a lot of traditional lenders out there ready to offer you deals. Those deals, however, could require long wait times and complicated application processes. One alternative lending process you may want to explore is online lending. 

As such, Kapitus offers a variety of lending options through its Helix Healthcare Financing, an online financing option that specifically addresses health care practices. With Helix, you can get a wide array of financing options with a pricing grid that is tailor-made for independent medical practices and that can meet your unique cash flow needs. 

The qualifications for Helix financing are most likely simpler than the requirements from traditional lenders. You’ll need:

• A FICO score of at least 600;
• A practice that is at least six months old;
• An annual revenue of at least $120,000, and
• You must be a licensed practitioner. 

Helix financing can give you the ability to consolidate debt and get rid of those high interest credit cards you may have been using to finance your practice and can offer you everything from equipment financing and revenue-based financing to term loans to increase your cash flow. 

The bottom line with Helix and other online lenders is that they are generally more accessible and may be able to offer a better cost of financing than traditional lenders. Their emergence over the past year has been in direct response to the difficulty many medical practitioners have had in getting financing from traditional sources, especially after the financial crisis brought about by the COVID-19 pandemic. 

SBA 7(a) Loan

The most widely used vehicle for medical practice financing is often the one that is the most difficult to obtain: the SBA 7(a) loan. This is often sought after by medical practitioners because it typically offers the lowest APR rates and carries loan terms longer than most traditional lenders – 5 to 25 years. It also carries a maximum loan amount of up to $5 million, and 85% of the loans of up to $150,000, and 75% of loans greater than $150,000 are guaranteed by the SBA.

It does have its drawbacks, however. If you’re just starting your practice, this is not the type of financing for you, as an SBA loan usually requires years in business and a strong business credit score. It also requires collateral for loans of more than $350,000. Because the terms are so favorable, competition for this type of financing is fierce. You also are going to run into:

• A long, competitive application process,
• An extended underwriting process, and
• A long timeline to capital access.

Traditional Bank Loan

The pros of traditional bank loans are that many banks offer financing products specifically tailored to the unique needs of health care practices. These loans, however, are difficult to obtain as they usually require years in business, high credit scores and high annual revenues. 

Approval for a traditional bank loan and access to cash can often take months, so this might be the right type of financing if you have long-term plans such as acquiring another medical practice or looking to purchase new real estate to expand your business. 

Term Loan

A term loan is a lump sum of cash that is paid back over a predetermined period of time. While term loans are offered by traditional banks, online lenders have become increasingly popular in the post-pandemic era as they more often offer lending services specifically designed to meet the needs of healthcare practices, have less stringent borrowing requirements than a traditional bank, and a quicker approval process.

Because online lenders generally may be willing to take on more risk than banks, however, they may charge a higher APR. You should take the time to explore the different pricing grids offered by various online lenders to see what is right for you.

Short-Term Loan

Short-term loans are generally provided by alternative lenders and are great if you need cash quickly. You generally can obtain these loans if you have a high, predictable monthly cash flow. 

If you are a veterinarian looking to quickly purchase a new dog kennel or a chiropractor looking to buy new beds for your patients, for example, this may be the right product for you. 

Keep in mind, however, that while the processing time for short-term debt is relatively quick, these types of loans typically carry a higher interest rate relative to a bank or SBA loan. 

A Business Line of Credit

Business lines of credit act like credit cards for your business and are offered by both traditional and alternative lenders. They could be ideal for mental health practitioners who are not seeking to purchase specific medical equipment, but perhaps are seeking furniture, larger office space and computer equipment. 

The advantages they offer are that, like credit cards, you will only pay interest on the money borrowed, and they will offer you quick access to funds and flexible repayment terms. They are not ideal, however, for one-off investments, and like a credit card, the fees and interest rates can add up if you’re not careful in your spending. 

Equipment Financing

Equipment financing is offered by both traditional and alternative lenders, but through online lenders, the borrowing terms are generally more relaxed and approval is often quicker. It is a great financing tool if you are a medical specialist such as an independent orthopedist and are seeking a new x-ray or MRI machine, or perhaps new computer equipment. Collateral on this type of financing is generally not required, and they are often easier to qualify for. If you are just setting up your practice, this could be a great financing tool for you, as you will own the equipment rather than leasing it.

The general cons of equipment financing are that the funds can only be used to purchase the equipment you specified in the terms of the loan, and that certain pieces of equipment that may become outdated quickly may carry higher interest rates. 

The Bottom Line

As a medical professional, you shouldn’t have a difficult time finding financing that is right for you, as lenders generally consider health care practices to be more lucrative than other business sectors. You should sit down with your accountant or financial expert to go over which type of financing is best for your particular practice, and target what the best terms and rates will be for you.