According to national averages, fully renovating a medical space can cost as much as $200 to $325 per square foot. Assuming that your practice requires hundreds, even thousands, of square feet, getting your practice off the ground and running can easily cost millions of dollars. Applying for a business loan for new medical equipment may be necessary.
For years, the incredibly high cost of starting a medical practice deterred many aspiring doctors from even trying. Instead, with limited options in front of them, many of these doctors would choose to work for another practice or even pursue a different career path altogether.
While starting—and maintaining—a medical practice of your own can still be incredibly expensive, there are considerably more financing options available than there were in years past. With a little bit of creativity and a willingness to explore your options, you can secure the exact sort of medical financing you need to succeed.
In this article, we will discuss the most important things for you to know about equipment financing. We will also discuss how your medical practice can leverage equipment financing to gain a competitive advantage.
What Is Equipment Financing?
As the term implies, equipment financing is the practice of funding new equipment over time. Very few doctors begin their practice with enough money to finance their equipment. However, without top-notch equipment, these same doctors will not be able to make money. Equipment financing can help you resolve this “catch 22” dilemma by giving you the capital you need to make major purchases.
A business loan for new medical equipment will have multiple different terms attached to it. Things such as the term length, the interest rate, and the total amount you are borrowing can all directly affect how much you’re paying in the end. It is also important to note that not all loans are completely linear—depending on the specific structure of your business, you may have a considerable amount of flexibility.
How Can Equipment Financing Benefit My Medical Practice?
The benefits of a business loan are obvious. Instead of needing to save for years and purchase your equipment piecemeal, you can immediately build a fully equipped practice and begin earning steady revenue streams.
Additionally, these loans can be used to replace faulty or outdated medical equipment sooner than you initially planned. More than in possibly any other industry, having high-quality equipment in the medical industry is essential. Not only will the lack of modern equipment cause you to lose out to your competitors—you may even be putting your patients’ well-being in jeopardy.
What Are The Best Loans For Financing Medical Equipment?
Within the broad category of “business loans” for medical equipment, you will discover that you have many different options available. The option that is right for you will depend on the current structure, goals, and needs of your practice.
Some of the best financing options for medical practices include:
- Small Business Administration (SBA) Loans: The SBA is a federally run organization that helps a wide variety of small businesses. These loans, which are “sponsored” by traditional banks offer you low rates, flexibility, and a level of funding that your business is unlikely to find elsewhere.
- Traditional Bank Loans: Traditional bank loans can be used for almost anything, but banks are especially likely to fund small medical practices. While the application process can be rigorous, these banks will typically ignore things such as large amounts of medical school debt.
- Alternative Lenders: The term “alternative lender” can be used to describe a wide range of lending programs. Many of these programs take place online and are designed to make the application and underwriting process significantly easier.
- Business Lines of Credit: BLOCs can be used by almost any new business, as long as the founder(s) has a reasonable credit score. These loans are very much like a credit card; as long as you can consistently make your payments, you’ll be able to purchase any type of equipment that you want.
In many cases, one loan may not be enough. Though each additional loan will be more difficult to come by, combining multiple loans into one maybe your best option.
How Can I Secure A Business Loan For New Medical Equipment?
Now that you are aware of the best business loans for new medical equipment, you are probably wondering how your business can secure desirable terms. If you are starting a business from scratch, the first thing you should do is create a highly detailed business plan. The more you can demonstrate how your business will make money, the more likely you will be able to secure a loan with reasonable terms.
If you are applying for a loan, you should also assign the components of the loan to a specific cost (such as purchasing new equipment). Borrowing money for the sake of having more money will be inefficient and cause long-term problems. If the piece of equipment you want to purchase is $15,000, then that should be the limit of your loan.
Lastly, your business should take active steps to improve its credit. If you are the sole owner, then your personal finances will have an impact on your initial lendability. By demonstrating responsible borrowing practices, taking steps to separate your finances (such as creating an LLC), and borrowing within your means, you will begin to appear more lendable.
Because equipment is such an important component of a medical practice, the way you finance this equipment will be one of the most important decisions you make as a business owner. Financing new medical equipment isn’t always easy. However, with more reasonable financing options available than ever before, you can bring your business to its full potential and ultimately achieve your dreams.
Checking for pre-approval will not affect your credit score.