4 Types of Funding Available for Medical Offices
Operating a medical practice involves overseeing everything from accounting to patient care. The owner may find that additional funds are needed to promote growth, cover current expenses, or take advantage of special opportunities. There are several types of financing options for people in the medical industry, and they each have their own set of pros and cons.
1. SBA Loan
New entrepreneurs can have a hard time obtaining traditional loans. The Small Business Administration assists entrepreneurs by offering a guarantee for a portion of the loan. This allows lenders to approve loans that would otherwise be denied due to the high amount of risk. The terms can vary depending on the borrower’s credit history, requested amount of funds and collateral offered.
2. Line of Credit
A line of credit can be a good option for business owners in the medical industry who have excellent credit and need a flexible financing option. A line of credit allows the owner to borrow and repay money up to a certain amount as needed, which can be invaluable during emergencies. Depending on the circumstances, the loan may not require collateral and the interest rates can be much lower than traditional or SBA loans.
3. Bank Loan
One of the most popular types of loans for small businesses is traditional bank loans. However, these loans can be difficult to obtain, especially for practices that have been in business for less than a year. The practice must have established good credit history and provide proof that it can afford to pay back the loan without a problem. The owner must also offer up collateral and may also need to go through a personal credit history check as well. The terms can vary based on the collateral, amount needed, and credit history.
4. Medical Factoring
Not all medical practices can meet the criteria for traditional loans. If the credit history, time in business, or lack of collateral negatively affects a company’s ability to get a loan, then medical factoring may be a good option. Medical factoring involves selling the practice’s invoices to another company. The company purchasing the invoices will not pay the full amount, but the funds are typically released within a week.
Medical practices often find that extra funds are needed to purchase new equipment, pay employees or advertise services to customers. Before obtaining a loan, it is a good idea for the owner to research the available options and compare the different terms to find the best deal.