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Business loans for pediatricians
Short- and long-term funding options to take your private practice to the next level.
Loan options for a pediatric practice
Whether you’re looking for revolving access to working capital or lump-sum funds to expand your pediatric practice, you have options. While lines of credit and business credit cards offer flexibility in how much you borrow and when, long-term business loans and leases can help cover larger expenses like expanding your office or buying new equipment.
1. Business line of credit
A business line of credit gives you continual access to funds — up to a certain credit limit. You can withdraw money whenever you need over a set period of time, usually anywhere from five to 10 years. You only pay interest on the amount you borrow, and your credit line replenishes itself as you pay back each draw.
The flexibility of a line of credit makes it ideal for managing your practice’s cash flow, covering unexpected expenses that crop up or financing a long-term project without a set budget.
2. General purpose business loan
Small business term loans like the one's listed below are ideal for larger expenses like buying new equipment, covering business operations or expanding your private practice. Repayments are typically monthly with your choice of fixed or variable rates and terms that range anywhere from five to 20 years.
Depending on the lender, you might have the choice between an unsecured or secured option that’s backed by collateral. How much you qualify for will depend on how long you’ve been in business, your annual revenue and your personal credit score — among other factors.
3. Equipment loan or lease
Your pediatric practice can use an equipment loan to purchase new or upgrade existing equipment. These loans usually require a down payment, which is a percentage of the purchase price of the equipment, and the loan is secured by the equipment itself.
Equipment financing can also sometimes be structured as a lease. When you lease a piece of equipment, you're basically renting it. A lease agreement typically requires no money down and no collateral. Once you reach the end of your lease, you’ll have the option to renew it, terminate it or purchase the equipment outright.
4. Business credit card
A credit card used for business expenses can be a valuable tool for building credit, smoothing over temporary cashflow issues and keeping your personal and business expenses separate. Many business cards offer rewards programs that let you earn extra points for certain business-related purchases, like paying your phone bill or buying office supplies.
Credit limits can also be higher than with personal credit cards. But most business credit cards have high interest rates, so you'll want to pay off the balance in full by the due date or the interest will quickly add up.
5. Short-term business loan
A short-term business or working capital loan can help you manage the costs of day-to-day operations, pay for an immediate need that pops up or take advantage of a sudden opportunity.
Typically, these are fixed-term loans, which have lower amount caps than other types of financing. Interest rates and fees can be higher as well, since there’s often no collateral required.
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How do I decide which type of loan is best for my business?
Consider the following factors when determining the best business loan for your practice:
- Loan amounts. To avoid paying interest on funds you don’t use, you should only take out a loan for the exact amount you need. For instance, If you’re buying kid-sized tables and chairs and decorations for the waiting room that cost $5,000, you wouldn’t want to take out a loan for $15,000 unless you're planning on making additional purchases.
- Repayment terms. No need to take out a long-term loan if you only need short-term money and vice versa. Each loan type has a different turnaround time to consider, too. If you need immediate funding, a standard term business loan that can take days or weeks to fund typically isn't your best bet.
- Interest rates. The interest rate is one of the biggest tells when it comes to how much your loan is going to cost. Some lenders allow you to pay your loan off early, which can save on interest costs — as long as they don't tack on a prepayment fee.
- Loan fees. Even if your lender charges low rates, if it charges origination, administrative, processing and prepayment fees, it may not be as inexpensive as you thought. Look at the full cost of the loan — interest, plus fees — before deciding which one makes sense for your business.
- Collateral requirements. Securing your loan with collateral could give you a lower interest rate and more borrowing power. But you could lose your collateral if you fail to repay the loan as agreed.
What common business expenses can I cover with financing?
Business financing can cover many of the common costs it takes to run your pediatric business, including:
- Operational costs. Costs to buy new kid-sized furniture, build a website or purchase office supplies are all operational costs that can be covered by a smaller business loan or line of credit.
- Equipment financing. Purchasing diagnostic equipment, vital sign monitors and electronic health record systems can be expensive. Taking out a secured loan can help. Or an equipment lease gives you access to necessary equipment without buying it outright, usually at a lower monthly cost.
- Moving or expanding. When you’re expanding your office space or moving to a larger facility, a term loan can help with the cost.
- Hiring staff. Hiring new staff or training your existing staff can be pricey. A term loan can be a lifesaver for pediatric businesses that need to up their staff but don't have the current working capital to fund adding someone new to payroll.
- Marketing. Having a marketing plan in place to grow your practice can help increase awareness of your practice and lets potential patients know why your practice is the best out there. A business line of credit may be all the financing you need to run a successful advertising campaign.
What do I need to apply?
Requirements for a pediatric business loan will vary based on the type of loan you’re applying for. Generally, you need some or all of the following information:
- Business information. This includes your business name, address, date established, number of employees and federal tax ID number or Social Security number.
- Business finances. Checking and savings account statements, tax returns and accounts receivable and payable are just some of the documents you may be asked for.
- Assets. If collateral is needed, you'll need to provide information on what collateral you’ll use to secure the loan.
- Personal finances. Your personal credit score, additional income and personal bank statements may be required.
- Current and past business debts. You may need to list and explain any previous and current debts before you're approved for a loan.
What challenges might I face as a pediatrician?
Pediatricians in solo practices are responsible for all aspects of their practice, including staffing and training, establishing policies and guidelines, office hours and finances. But growing your business can be complicated if you can't get the right type of financing when you need it.
A standard term loan can be hard to qualify for when you don't have a long business history, but there are other options to keep you moving forward and growing. Using a line of credit to market your practice can help you land new patients while keeping your existing client base. And new equipment can be funded with a secured equipment loan or lease.
6 tips to make your new pediatric private practice succeed by the AAP
The path to success depends a great deal on if you’re just starting out or have been on the scene for years. These tips from the American Academy of Pediatrics (AAP) are geared toward pediatricians entering private practice for the first time.
- Compare insurance before you buy. Make sure you're getting the best deal for the amount of coverage that makes sense for your practice. Remember, the cheapest option isn't always the best option.
- Consider working with a consultant. Take some of the guesswork out of the sides of the clinic you might not be as experienced with — like accounting or computer security. A consultant can be handy for keeping tabs on parts of the business you're unfamiliar with.
- Research your location. To successfully open your private practice, you need to know who you're reaching in a given location. Getting a good read on locations can also help you size up your competition.
- Write a business plan. Set realistic, measurable goals, and decide what resources you’ll need to carry them out. You can also use the business plan to help anticipate any obstacles you may need to overcome once you get busy with day-to-day clinic work.
- Hire great staff and train them well. Your clinic won't be a one-person show. Make sure you're surrounded by staff that knows how to treat patients with respect and kindness and who are great in their field.
- Market your business. As with any business, you need to know how to market your practice. Emphasize what sets you apart from nearby competitors, and make sure your expertise shines through.
If you’re interested in owning a pediatric practice, you can either start your own or buy an existing practice from a physician looking to sell. Either way, you’ll likely need financing. When you’re ready to consider a loan for your pediatric business, read up on the basics with our guide to business loans.
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