From time to time, just like any small business owner, doctors and other healthcare providers may need outside financing to invest in growing their businesses or to plug cash flow gaps.
When it comes time to find lenders, doctors have a number of options. They can:
- Apply for business loans through traditional financial institutions
- Try to secure financing via the Small Business Administration
- Sell equity to investors or other doctors
But it’s almost impossible to get approved for a loan by a bank—particularly when your practice is new. Generally speaking, banks expect borrowers to have been in business for at least two years, generating $250,000 in annual revenue. Because of these qualifiers, less than 50% of small businesses are approved for loans after completing the time-consuming application process.
Similarly, it can be extremely difficult to get approved for a loan through the SBA, and the process can take forever, too. There’s always the third option, but many small business owners don’t want to sell ownership stakes in their companies.
Doctors who aren’t fans of those three options aren’t completely out of luck. In fact, they may very well find a fourth option, working capital loans, to be just the financial vehicle they’re looking for.
Quite simply, working capital loans provide doctors with money they need to cover short-term expenses. You can use these physician loans to pay rent and utilities; cover payroll; renovate your exam rooms; buy new medical equipment and supplies; open an additional location; or launch a new marketing campaign, among other things.
Unlike other kinds of financing, you don’t have to fill out an insane amount of paperwork to receive a working capital loan. You also don’t need to put up any collateral or even a personal guarantee. What’s more, the approval process for working capital loans is super quick; you’ll get funded within a few business days.
What’s not to like?
Now that you’ve made the decision to take out a working capital loan, here are four things to keep in mind before signing up for any old one:
- Shop as many lenders as you can at once.
When you’re in the market for a new car, chances are you do a fair amount of research and shop a bunch of different dealerships to see where you can find the best deal.
Similarly, you shouldn’t apply for the first working capital loan you come across. Instead, use a consumer comparison service that allows you to shop a many lenders simultaneously. You’ll be able to find the most favorable rates and terms this way.
- Look for lenders that offer flexible repayment terms.
While you might have a pretty good idea of your projected revenue, it’s impossible to predict the future. For example, a huge storm may force you to close your practice for an unexpected extended period of time. You can’t see patients when your office is closed, which means you can’t bill them, either.
That being the case, look for lenders who offer flexible repayment terms. That way, you’ll be able to repay your loans in full without having to worry about any hiccups you may encounter along the way.
- Don’t take out more money than you need.
The larger your loan is, the more money you’ll have to pay back.
There’s no sense in applying for a bigger loan than you need. Prior to filling out any paperwork, crunch some numbers to see exactly how short on cash you are. Try to secure a similar-sized loan.
- Try to repay your loan in full as quickly as you can.
Just because your working capital loan might not need to be repaid for a year doesn’t mean you have to wait a full 12 months before squaring up.
Should a working capital loan help get your business where you want it to be earlier than anticipated, do your best to pay it back in its entirety as soon as possible. That way, you’ll incur fewer interest expenses.
Working capital loans allow doctors to grow their practices without having to sell a slice of their business or spend an incredible amount of time applying for financing they’re unlikely to receive in the first place.
By doing your due diligence to find the business loan that makes the most sense for your specific situation, you also get the peace of mind that comes with knowing you’ll be able to deliver better care to your patients. What’s better than that?