Starting a medical practice is a dream of many physicians. However, it also comes with a steep financial barrier. Doctors need to purchase high-cost diagnostic equipment, a good clinic space, hire staff, manage electronic records, and do a lot more, all of which requires significant capital.
Despite strong earning potential, many doctors struggle to access the right type of funding, particularly early in their careers or immediately after completing residency.
This is where physician practice loans come in. These loans and associated policies are designed specifically to accommodate the financial profile and needs of medical professionals.
In this article, we will talk about different physician practice loans, how they work, eligibility criteria, as well as how you can choose the right financing strategy for your goals.
Types of Physician Practice Loans
Here are the different physician practice loans you can avail:
Term Loans
For term loans, physicians borrow a fixed sum and repay it over a set period, usually with monthly installments that include both principal and interest. Repayment terms typically range from three to ten years, and interest rates are decided by creditworthiness and business history.
These loans are ideal for large, one-time expenses such as purchasing medical equipment, renovating clinic space, or funding a new practice launch.
Practice Acquisition Loans
Physicians looking to buy into an existing practice or acquire one outright often turn to practice acquisition loans. These loans typically account for goodwill, equipment, patient base, and existing staff. Plus, they can also include provisions for partnership buy-ins.
To qualify, the lenders demand detailed financials of the target practice and a strong personal financial profile.
Equipment Financing
Medical and diagnostic equipment is a major investment. Equipment financing allows doctors to purchase or lease machinery, such as X-ray systems, ultrasound machines, or EMRs, without tying up large amounts of capital.
The equipment itself typically serves as collateral. Financing terms usually mirror the expected useful life of the equipment, and this option can offer tax advantages through depreciation.
Commercial Real Estate Loans
For physicians planning to buy or construct their own clinical premises, commercial real estate loans are a long-term solution. These loans help finance the purchase of medical office buildings, outpatient centers, or even multi-speciality clinics.
The upside is longer repayment timelines, typically 10 to 25 years. However, this loan may require a substantial down payment or collateral.
SBA Loans
The U.S. Small Business Administration (SBA) offers loan programs such as the 7(a) and 504 loans that are popular among healthcare professionals. These loans have competitive interest rates and longer repayment terms. This makes them a good option for general expansion, equipment purchase, or real estate development.
While the application process is more extensive, SBA loans are partially guaranteed by the government, reducing lender risk, and hence are easier to avail.
Business Lines of Credit
A business line of credit provides physicians with flexible, revolving access to funds. It’s useful for managing unpredictable cash flow, covering operational costs, or handling short-term expenses like payroll and supplies. Interest is only paid on the amount drawn, not the full credit line, offering a cost-effective safety net for day-to-day needs.
Working Capital Loans
Working capital loans are short-term financing tools designed to maintain the operational health of a practice. These are typically used to bridge gaps in cash flow, especially during seasonal fluctuations or while awaiting insurance reimbursements.
They can help cover rent, utilities, and staff salaries without interrupting the delivery of patient care.
Eligibility Criteria for Physician Practice Loans
Here’s what you need to apply and qualify for physician practice loans:
Medical License and Professional Credentials
The borrower must hold a valid medical license in the state where they intend to operate the practice. This includes physicians (MDs and DOs), dentists (DDS or DMD), podiatrists, and in some cases, veterinarians and optometrists. Lenders may also request proof of board certification or specialty training to assess the scope and credibility of the practice.
Credit History and Score
A strong personal credit score is one of the most critical eligibility factors. Most lenders prefer a credit score of 660 or higher, although some specialized physician lenders may be more flexible.
In addition to credit score, lenders will evaluate credit history, outstanding debts, and any delinquencies. A solid financial track record reflects reliability and lowers perceived risk.
Business Plan and Revenue Projections
For new practices or expansions, lenders often require a detailed business plan. This includes market analysis, estimated startup costs, projected revenue, and a strategy for growth. For existing practices, historical financial statements such as profit and loss records, tax returns, and cash flow statements will be reviewed.
Experience and Employment History
Many lenders prefer that borrowers have at least two years of clinical experience, either in private practice or under employment. However, some programs are designed for recent graduates or physicians transitioning out of residency, offering more lenient terms or grace periods.
Collateral or Personal Guarantee
Depending on the loan type and amount, lenders may require collateral such as business assets, medical equipment, or even a personal guarantee. This helps mitigate the lender’s risk, especially for unsecured loans.
Apply for a Loan!
Securing the right financing is a critical step in launching, growing, or stabilizing a physician-owned practice. This article has covered the key types of physician practice loans, eligibility requirements, and how these options differ from traditional business financing.
At RokBiz, we understand the unique financial needs of healthcare professionals. That’s why we offer physician-focused lending solutions that are flexible, fast, and tailored to support your long-term success. Whether you’re opening your first clinic or expanding an established practice, we’re here to make the process seamless.
Apply for a physician practice loan with RokBiz today and take the next step toward building the practice you’ve envisioned.
Frequently Asked Questions
How to choose the right financing option for a physician at private practice?
Here’s how to know which financing option is the right fit for you:
- Assess your needs: Are you starting a new practice, expanding, or acquiring equipment? Match the loan type to your specific goal.
- Compare interest rates and terms: Look for competitive APRs, manageable repayment periods, and no hidden fees.
- Evaluate repayment flexibility: Consider lenders that offer interest-only payments or deferred schedules, especially early in the practice lifecycle.
- Check eligibility criteria: Ensure your credit score, experience, and documentation align with the lender’s requirements.
- Consider lender reputation: Choose institutions with healthcare-specific lending experience and strong support services.
- Understand the total cost: Factor in origination fees, prepayment penalties, and potential tax implications.
How do physician practice loans differ from traditional business loans?
Physician practice loans are designed specifically for medical professionals. They tend to have more favorable terms, such as higher borrowing limits, reduced documentation, and lower interest rates.
Lenders view physicians as lower-risk borrowers due to their stable income potential, which results in more flexible underwriting compared to conventional business loans.
