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Small Business and SBA Lending Blog
Last updated on May 30, 2023
9 min read
by Jeff Hamann

A Physician's Guide to Business Financing

Navigate the complex world of business finance with our comprehensive guide on SBA loans for physicians. Discover the key to expanding your practice, buying equipment, and more.

In this article:
  1. Understanding the Importance of Business Financing in Healthcare
  2. What Are SBA Loans?
  3. The Role of the Small Business Administration
  4. Understanding SBA 7(a) Loans
  5. Why Do Physicians Need SBA Loans?
  6. The Need for Financing in the Medical Sector
  7. Unique Business Challenges Faced by Physicians
  8. SBA Loans for Different Types of Physicians
  9. Financing for Family Doctors/General Practitioners
  10. Funding Opportunities for Specialist Physicians
  11. 5 Reasons to Get an SBA Loan for a Medical Practices
  12. Expanding Your Practice
  13. Buying Another Business or Practice
  14. Financing the Purchase of Medical Equipment
  15. Supporting Operational Costs
  16. Restructuring Existing Debt
  17. The SBA 7(a) Loan: A Detailed Look
  18. The Features of SBA 7(a) Loans
  19. How to Apply for an SBA 7(a) Loan
  20. Tips for a Successful SBA 7(a) Loan Application
  21. Other SBA Financing Options
  22. SBA 504 Loans
  23. SBA Express Loans
  24. SBA Microloans
  25. Choosing the Right SBA Loan for Your Medical Practice
  26. Case Studies: Success Stories of Physicians with SBA Loans
  27. A Family Doctor's Expansion Journey with an SBA 7(a) Loan
  28. A Specialist Physician's Practice Acquisition with SBA Financing
  29. Your Path Towards a Prosperous Medical Practice
  30. The Next Step in Your Business Financing Journey
  31. Get Financing
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In modern healthcare, physicians not only have to be medical experts, but they also often need to navigate the complex world of business finance. This can be particularly challenging for those who have spent their lives focused on patient care instead of profit margins. 

In this article, we aim to demystify one critical aspect of business finance for physicians: Small Business Administration (SBA) loans. We will explore the unique benefits they can offer to both family doctors and specialist physicians.

Understanding the Importance of Business Financing in Healthcare

Business financing plays a critical role in healthcare. Whether it's for the expansion of a practice, acquisition of another business, or purchasing new equipment, financing is often the key to growth and development.

However, traditional business loans can sometimes be out of reach for medical professionals due to strict lending criteria. That's where SBA loans come in, providing more accessible and flexible financing options for physicians who are keen to grow their practice and better serve their patients.

What Are SBA Loans?

Small Business Administration (SBA) loans are a type of business loan guaranteed by the SBA, a U.S. government agency. These loans are designed to assist small businesses in obtaining financing that they may not be eligible for through traditional lending channels.

SBA loans are provided by participating lenders, which are typically banks, and are guaranteed by the SBA for a portion of the loan amount, reducing the risk for lenders.

The Role of the Small Business Administration

The SBA's role is to support small businesses and entrepreneurs in their pursuit of growth and success. By guaranteeing loans, the SBA encourages lenders to provide financing to businesses that might otherwise be considered too risky. This allows a wider range of businesses, including medical practices, to access the funding they need to expand, invest in new equipment, or manage cash flow.

Understanding SBA 7(a) Loans

The SBA 7(a) loan program is the SBA's most popular loan program. It offers flexibility, longer terms, and lower down payments compared to conventional business loans. These loans can be used for a variety of business purposes, such as purchasing real estate, equipment, or inventory, working capital, or even refinancing existing business debt.

Why Do Physicians Need SBA Loans?

The Need for Financing in the Medical Sector

Whether you're a family doctor or a specialist physician, running a medical practice requires a significant amount of capital. From state-of-the-art medical equipment to real estate for your practice, the costs can add up quickly.

SBA loans can provide the necessary funding to cover these expenses, allowing physicians to focus on what they do best - providing excellent patient care.

Unique Business Challenges Faced by Physicians

Physicians face unique business challenges that many other small businesses do not. These include substantial upfront costs, ongoing investment in expensive equipment, and fluctuating income due to changes in healthcare policies and insurance reimbursement rates.

SBA loans, with their flexible terms and lower down payments, can help physicians navigate these challenges more effectively.

SBA Loans for Different Types of Physicians

Financing for Family Doctors/General Practitioners

Family doctors and general practitioners often operate in smaller settings, and they serve a wide range of patients. An SBA loan can help these physicians expand their practice, purchase new equipment, or even hire additional staff to better serve their community. Whether it's opening a second location or investing in telemedicine technology, an SBA loan can provide the necessary funding to realize these goals.

Funding Opportunities for Specialist Physicians

For specialist physicians, staying at the forefront ofmedical advancements is crucial. However, the equipment and technology required can be prohibitively expensive. An SBA loan can help cover these costs, ensuring that specialists can continue providing the highest level of care to their patients. Additionally, specialist physicians looking to start their own practice can use SBA loans to finance the initial start-up costs.

5 Reasons to Get an SBA Loan for a Medical Practices

This list is far from exhaustive, but read below to learn five common reasons physicians apply for and use SBA financing for their practices.

Expanding Your Practice

Expanding your medical practice can take many forms, from opening a new location to adding new services. Regardless of the type of expansion, it often requires a significant financial investment. SBA loans, with their favorable terms and conditions, can provide the necessary capital to fund this growth.

Buying Another Business or Practice

Acquiring another business or medical practice can be an excellent way to grow your patient base and increase revenues. However, the costs involved in such acquisitions can be substantial. SBA loans can be used to finance these purchases, helping physicians take advantage of these opportunities without overextending their finances.

Financing the Purchase of Medical Equipment

The purchase of medical equipment is often one of the largest expenses for a medical practice. Whether it's a new MRI machine or a state-of-the-art surgical tool, this equipment can be costly. SBA loans offer a solution to this challenge, allowing physicians to finance these purchases and repay the loan over a longer period.

Supporting Operational Costs

Running a medical practice comes with ongoing operational costs, from salaries and benefits for staff to utilities and supplies. At times, these costs can strain a practice's cash flow, especially during slow periods or unexpected downturns. SBA loans can provide working capital to help manage these operational costs, ensuring the practice can continue running smoothly.

Restructuring Existing Debt

If a medical practice has existing debt from multiple sources, managing repayments can become a complex task. An SBA loan can be used to consolidate this debt into a single loan with a potentially lower interest rate and more manageable monthly payments. This can help free up cash flow and simplify the financial management of the practice.

The SBA 7(a) Loan: A Detailed Look

The Features of SBA 7(a) Loans

SBA 7(a) loans are known for their flexibility and borrower-friendly terms. They offer longer repayment terms, up to 25 years for real estate purchases, and lower down payments than most traditional loans. Interest rates are also competitive. This makes them an appealing choice for physicians looking to finance their medical practice.

Today’s SBA 7(a) terms are found below:

How to Apply for an SBA 7(a) Loan

The application process for an SBA 7(a) loan involves several steps. The Janover marketplace handles the entire process with the documentation you provide.

First, you'll need to verify your eligibility by ensuring your medical practice qualifies as a small business according to SBA standards. 

Second, you'll need to gather necessary documentation, including financial statements, a business plan, and information about any existing debts. 

Finally, you'll submit your application through our marketplace, or through participating lenders individually.

Tips for a Successful SBA 7(a) Loan Application

To increase your chances of a successful SBA 7(a) loan application, it's crucial to present a well-prepared business plan that clearly outlines how the loan will be used and how it will benefit your practice. Also, maintaining good personal and business credit scores can improve your odds of approval. Lastly, working with an experienced SBA financing expert can make the process smoother and greatly increase your chances of success.

Other SBA Financing Options

SBA 504 Loans

While the SBA 7(a) loan is the most common type of SBA loan, there are other options available. The SBA 504 loan program, for instance, is designed specifically for the purchase of fixed assets like real estate or large equipment. These loans can be especially useful for physicians looking to buy a building for their practice or invest in expensive medical technology.

While SBA 504 loans may look complicated, due to their two-loan structure, the results are beneficial for those looking to take advantage of long-term financing at a low interest rate.

SBA Express Loans

SBA Express loans are essentially SBA 7(a) loans, but with one major differentiator: They’re extremely fast. Expect an approval within a few days, and funding a short time later. The loan has the same eligible uses as the 7(a), but the faster execution makes them attractive for businesses who need cash fast.

Of course, there are trade offs. SBA Express loans carry higher interest rates, and there’s still a fair amount of paperwork required.

SBA Microloans

SBA Microloans are smaller loans, up to $50,000, that can be used for a variety of business purposes, including working capital, inventory or supplies, furniture or fixtures, and machinery or equipment. These loans can be a good fit for small practices or new physicians just starting out who need a smaller amount of financing.

Choosing the Right SBA Loan for Your Medical Practice

Each SBA loan program has its own unique features and benefits. The best choice for your practice will depend on your specific needs and circumstances. Consider the purpose of the loan, the amount needed, and the repayment terms that will best fit your practice's cash flow.

Case Studies: Success Stories of Physicians with SBA Loans

A Family Doctor's Expansion Journey with an SBA 7(a) Loan

Dr. Smith, a family physician in a small town, was looking to expand her practice to serve more patients. She used an SBA 7(a) loan to finance the purchase of a larger building, allowing her to add more exam rooms and hire additional staff. Today, her practice is thriving and she's been able to provide care to a larger portion of her community.

A Specialist Physician's Practice Acquisition with SBA Financing

Dr. Johnson, a cardiologist, was presented with the opportunity to acquire a retiring colleague's practice. The purchase would double the size of his patient base overnight, but he needed significant financing to make it happen. 

With an SBA 7(a) loan, Dr. Johnson was able to acquire the practice and seamlessly integrate it with his own, leading to increased revenues and enhanced patient care.

Your Path Towards a Prosperous Medical Practice

SBA loans offer a range of benefits for physicians looking to finance their medical practices. From flexible terms and lower down payments to the ability to finance a variety of business needs, these loans can be a game-changer for both general practitioners and specialists. Whether you're looking to expand your practice, purchase new equipment, or manage operational costs, an SBA loan could be the solution you need.

The Next Step in Your Business Financing Journey

Taking the leap into business financing may feel daunting, but remember, you're not alone in this journey. There are numerous resources available to help guide you through the process on our website, and many physicians have successfully used SBA loans to grow and enhance their practices.

Not sure where to get started? That's where our expertise is at your service. Enter your details into the form below, and we'll be happy to answer any questions you have as we find you the best terms possible for your practice.

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