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Are you looking for ways to finance your medical practice? Fortunately, you don’t have to look far. Medical professionals have plenty of options when it comes to medical practice financing. Most lenders favor doctors and specialists because medical practices are often profitable, which means they can easily repay the loan.
When looking for funding, you need to choose between the two main types of medical business loans:
- Traditional medical business loans
- Alternative medical business loans
Ultimately, the type of loan you choose heavily depends on the intended use of funds. Traditional loans are best fit for larger loan amounts and longer repayment terms. On the other hand, alternative loans are more appropriate if you need immediate funding for short-term expenses.
Many business owners and medical professionals now prefer alternative loans from alternative lenders (online lenders) because of speed and convenience. However, taking out an alternative medical practice financing is a huge decision. It’s important to weigh the pros and cons before applying.
Pros of Alternative Medical Practice Financing
Unlike traditional lenders, alternative lenders offer fast funding, simple and straightforward application, and competitive rates. It’s important to determine when to use short-term and long-term financing in order to maximize the value of your practice. Many business owners prefer long-term financing to save money on monthly payments. However, your practice can greatly benefit from alternative loans as well.
1. Second Collateral Position is Acceptable
While lenders look favorably upon doctors and specialists, traditional lenders (banks, credit unions, SBA loan providers, etc.) would prefer to take the first lien on your collateral. This can be complicated for medical professionals that have multiple existing loans, making it difficult to qualify for a quick funding solution. Alternative lenders, however, can allow second collateral position to other lenders, while some don’t ask for collateral at all. Be sure to ask your lender for more information before applying for an alternative loan.
2. Competitive Rates for Ideal Borrowers
Many medical professionals prefer traditional loans because of their competitive rates. However, alternative financing offers competitive rates to prime borrowers – even as competitive as bank loans. For instance, SMB Compass’ APR for multi-year term loanscan be as low as 6.5%. Loans from traditional lenders are notoriously difficult to qualify for, so if alternative loans offer competitive rates, then there’s no reason for you to go through all the difficulty just to secure funding.
3. Fast and Simple Funding
It’s no secret that traditional business loans take a few weeks before you get funded. But with alternative business loans, the application and funding process only takes 24 to 48 hours. The application process is entirely done online and you can complete it within five minutes. You’ll have more time to manage your practice and treat your patients.
Cons of Alternative Medical Practice Financing
Aside from the pros, alternative loans also have drawbacks and it may not be the best for some financing situations.
1. More Expensive than Bank Loans
Alternative business loans are often more expensive than traditional business loans. However, some people may find alternative loans worth it. The time spent applying and waiting around for approval may cost more than the interest rates from alternative lenders.
2. Lower Loan Amounts
Traditional lenders are able to offer higher loan amounts because of the stricter requirements and extensive underwriting process. On the other hand, alternative lenders can’t let you borrow as much. But alternative lenders like SMB Compass can fund up to $5,000,000, depending on the type of loan. If you’re looking to borrow a large sum for more expensive purchases, traditional lenders are the better option.
3. Shorter Repayment Terms
Traditional lenders can extend credit for five years or more for credible borrowers. However, alternative lenders rarely set a repayment term of more than three years. Shorter repayment terms may not be all bad. The longer the term, the higher the costs, even if the interest rate is lower. Make sure to plan your cash flow so you’d know which option is the best for your practice.
Alternative Medical Practice Financing for Medical Professionals
Alternative medical practice financing can range from bridge loans, equipment financing, business line of credit, SBA loans, term loans, and more. SMB Compass offers different types of loan products for medical practices in the United States.
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