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5 Financing Options to Cover Temporary Cash Flow Crunches

Posted on Oct 06, 2020 by Samantha Novick

    Cash flow issues happen to every practiceManaging your business is probably a breeze compared to your healthcare practice responsibilities, but that doesn't mean you won't encounter cash flow crunches. Like any other small business, you'll sometimes need extra working capital to grow your practice or weather a storm.

    Fortunately, you have options.

    Whether you need to upgrade your equipment, hire (and retain) a topnotch staff, or cover emergency expenses, there are multiple types of financing you can claim to meet your needs. Below, we'll cover five first-rate financing options you can use to cover temporary gaps in your cash flow.

    1. Medical Practice Loan

    Medical practice loans are special loans designed specifically for physicians and specialists. These loans come in a variety of shapes and sizes to accommodate whatever your business needs. Lenders of these loans understand your financial situation—you may have a brand-new practice that needs financing but a boatload of bills from your medical school debt.

    These loans usually come with generous borrowing limits, rates, and terms. Lenders understand your financial potential and market demand, so they don't worry as much about you making your payments.

    2. Business Line of Credit

    A business line of credit is a different kind of loan. It's a revolving amount of capital that you can tap into on a per-need basis—kind of like a credit card.

    Use your line of credit, pay the portion you used off, and then get access to the funds again—no need to reapply. Plus, you only pay interest on the funds you use, not the entire amount of your line.

    A business line of credit is a great financing tool to keep in your back pocket because you're under no obligation to use it. Whether you tap into it regularly to cover cash flow crunches or keep it as a backup financing tool for an emergency is entirely up to you. You can use it to cover pretty much any business need: making payroll, purchasing equipment, repairs and maintenance, and other miscellaneous expenses. 

    3. Equipment Financing

    Let's face it—equipment is expensive. It takes a good deal of capital to get your practice outfitted with the best equipment, and then that equipment needs to be periodically repaired, maintained, upgraded, and replaced. It's an ongoing expense, and it's far from cheap.

    Equipment financing helps you cover all these costly expenses with a couple of features that make it more convenient:

    • No collateral: The equipment your financing usually covers the collateral, so you don't have to provide personal collateral or steep down payments.
    • Generous repayment terms: Often, repayment terms will match the lifespan of the equipment your financing so that you're not stuck making debt payments on obsolete tools.

    4. Short Term Loan

    If you need quick access to capital, a short term loan is a good option. You can use a short term loan to Short term loanfinance practically any of your practice's needs.

    While they generally come with high-interest rates and short repayment periods, you can get access to cash very quickly—plus, the short repayment terms means you won't carry the debt year to year.

    The best part about a term loan is the predictable repayment schedule. With these loans, you know exactly how much you owe at the end of each month, making it easier to include in your budget and cash flow forecasts.

    5. SBA 7(a) Loan

    Small Business Administration (SBA) loans are government-backed loans that mitigate risk for lenders, meaning lower rates, higher borrowing limits, and more generous repayment terms for you. Like with a term loan, you can use an SBA 7(a) loan to finance any of your practice's needs.

    The biggest downside to SBA loans is their competitive nature. These loans are intended for established businesses—and due to their excellent terms, everybody wants them. 

    How to Choose the Best Financing Option for Your Practice

    When it comes to choosing a loan, there's no right answer. You'll have to look at your practice's unique needs and then decide which financing option is most appropriate.

    For example, if you frequently encounter small hiccups in your cash flow, a business line of credit is probably all you need. On the other hand, if you need to make an emergency equipment repair or replacement, you might want to get a short term loan or equipment financing so that your cash flow doesn't get tied up.

    Fortunately, as a doctor or medical specialist, you'll likely have an easy time qualifying for a good loan. For better or worse, you're in a fantastic position of having multiple options. Evaluate your business needs, review these financing options, and choose the loan that makes the most sense.

    For more tips on efficiently managing your practice, check out our free guide. 

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    Samantha Novick

    Samantha Novick

    Samantha Novick is a senior editor at Funding Circle, specializing in small business financing. She has a bachelor's degree from the Gallatin School of Individualized Study at New York University. Prior to Funding Circle, Samantha was a community manager at Marcus by Goldman Sachs. Her work has been featured in a number of top small business resource sites and publications.

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