Business loans for medical professionals

Running your own medical practice requires sound financial knowledge and management skills, no matter if you’re just starting out or have years of experience as a doctor.

Knowing the financing options available for your practice is crucial at every step, and our guide will outline the loans you might need when running your business.

In this guide…

• 6 types of loans to consider
• Top business loans to apply for today
• How to compare offers
• What you can use a business loan for

• How to get approved
• Costs to consider for starting a practice
• Costs to consider for buying an existing practice

6 types of loans to consider for medical practices

What business loan does your medical practice need? We’ve narrowed the list down to 6 financing options that match how medical practices bring in revenue and their common expenses.

Loan type	Typical amount	Features
Line of credit	$5,000 up to millions of dollars	Business lines of credit give your medical practice ongoing access to funding when you need it for whatever you need it for. You only pay interest on the amount you borrow.
Invoice financing	Up to 80% of the invoice	Just because your practice has regular patients doesn’t mean you get paid when you need it. Invoice financing is an advance on the amount you’ll be paid by the patient.
Invoice factoring	Usually between 75% and 90% of the invoice	Invoice factoring works similarly to invoice financing, but rather than receiving an advance on your invoices, you sell your invoice to a third-party.
Fixed term business loan	$5,000 up to millions of dollars	With a fixed term business loan, you can borrow a large lump sum and pay it back over the course of years. These can have fixed or variable interest rates. If your business qualifies, you may be able to borrow a Canada Small Business Financing Program (CSBFP) Loan.
Equipment loan	Cost of equipment	From a suite of office furniture for your lobby to a new X-ray machine, an equipment loan can finance nearly any expensive equipment. The equipment acts as collateral, giving you access to lower rates.
Short-term business loan	$2,000 – $250,000	These are lump-sum loans with terms ranging from 3 to 12 months. Use it to cover unexpected expenses or seasonal cash flow shortages. They typically come with a quick and easy application process.

Representative example: Yasmeen opens a medical practice

Yasmeen wants to start a private medical practice near her home in Ontario but needs a loan to cover the costs. Medical licensing and registration fees alone will cost just over $2,000.00, while a commercial property lease in her area will likely cost around $2,800.00/month. Along with other costs of starting a practice – including equipment, renovations, insurance, staffing and administrative expenses – Yasmeen calculates a total initial investment $100,000.00 to get up and running.

She applies for a business loan from her bank and, thanks to her solid credit history, gets approved. Yasmeen signs the loan documents, and the funds are soon deposited into her account.

Cost of purchasing a pharmacy	$100,000.00
Loan type	Business loan (term loan)
Loan amount	$100,000.00
Interest rate (APR)	8.49%
Loan term	7 years
Additional fees	Origination fee of 3.00% ($3,000.00)
Monthly payment	$1,583.15
Total loan cost	$132,984.60

*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.

What can I use a medical practice business loan for?

Business loans typically aren’t for propping up a failing practice. Instead, they’re an option for medical practices that need to expand.

They’re also a suitable option for doctors who want to buy out another practice or start an independent one. A business loan can cover those crucial starting expenses that can make the difference between success and failure.

A business loan can be helpful for:

• Financing what you need to establish a new practice.
• Funding to purchase an existing practice.
• Buying or upgrading business equipment.
• Managing ongoing cash flow needs.
• Covering the day-to-day costs of running your business.
• Meeting the expense of extending or expanding your practice.

What should I consider when comparing business loans?

Taking the time to analyze your loan options will benefit your business and save you money in the long run. Here are some of the top features you should compare in different loans.

• Interest rates. You’ll need to choose what sort of monthly or quarterly payment your practice can handle. A lower interest rate results in a smaller loan, overall. But fees and loan terms may not align with your business needs.
• Loan fees. Most business loans have an origination, service and other fees that your lender will discuss with you during the application process.
• Loan amounts. Most lenders has maximum loan amounts that they offer borrowers. Make sure that the lender you choose will cover your financial needs.
• Loan terms. Some loans, like lines of credit, have short terms that last only a year or 2. Other larger loans can last for many years. Longer terms often mean lower monthly payments — but more money paid in interest.

What do I need to be approved?

Criteria for approval varies between lenders. Though, there are a few simple things you can do to improve the chances of your application being approved.

• Check the criteria. Read the fine print to make sure you satisfy all of the loan eligibility criteria.
• Prepare your financial documents. Make sure your balance sheets are in order. Have a detailed and realistic business plan in place that outlines how your business will grow in the future.
• Get expert advice if needed. An independent accountant can crunch the numbers and help you make an informed decision about your practice’s financing options.

Costs to consider when starting a new practice

For many medical professionals, the opportunity to build your own practice from the ground up is an exciting opportunity. If you’re thinking of starting your own medical practice from scratch, consider the following expenses to factor into your budget:

• Buying or leasing an office with enough space for each doctor.
• Purchasing expensive medical equipment.
• Acquiring essential office supplies.
• Paying insurance premiums.
• Advertising and marketing expenses.
• Hiring and paying staff.

Many of these are upfront costs you’ll need pay before you even open your doors. A business loan can help get things set up so your first few months run smoothly.

Costs to consider when purchasing an existing practice

If you’ve decided that purchasing an existing medical practice is a better option, there are still several costs to consider. Your financing options will vary depending on if you’re buying only the business or the property too.

With both purchases, the office space will likely already be furnished and suited to many non-specialized medical practices. Lenders may be willing to extend between 60% and 80% of the business’s value if you’re buying without property. While some may finance 100% of the business if you’re buying the business and the property.

Apart from the actual cost of purchasing the business, other costs to consider when buying an existing practice include:

• Any existing debts the business may have.
• Funding necessary equipment upgrades.
• Staff salaries.
• Insurance costs.

Bottom line

A business loan can be an excellent way to increase your practice’s capital or fund a new venture, no matter your specialization. When you’re ready to apply, check for low rates and good terms to make sure your medical practice can flourish.

Frequently asked questions

• How long will it take to be funded?

  It depends on the loan. Some lenders may be able to process and fund your application within a few days, while others may take weeks. CSBFP loans are approved and funded by banks, so the money will be released according to the timeline banks typically follow for loan disbursements.

• Will my personal debt impact my ability to get a loan?

  It might. If you need to take out a larger loan, or your lender requires a personal guarantee, your personal debt may prevent you from taking out larger loan amounts. Many business lenders will take into account your personal credit score as well as your business credit score when evaluating your loan application.

• Can I use a personal loan to fund my medical practice?

  Yes, but it may not be a wise decision. A personal loan could be useful if you’re looking to buy out a partner, but it may not be sufficient if you need to purchase equipment. Check with your accountant or other financial advisor when determining what type of loan you should borrow.