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.
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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. |
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.
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:
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.
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.
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:
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.
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:
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.
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