Business lines of credit are a popular financing option for a variety of businesses including medical practices. Many medical practices use business lines of credit from online lenders or a bank. This financing option provides several benefits to them.
We’ll explain what a business line of credit is and how your medical practice can benefit from it. We’ll also shed light on how medical practice owners can get approved for a business line of credit.
Business Lines of Credit
In many ways, a business line of credit functions like a credit card. A lender approves a borrower for a credit line of a particular amount. Interest is only be paid on the funds that are actually used by the borrower. Once a business line of credit has been established, the borrower can quickly access the funds, up to their approved limit.
Benefits of Business Lines of Credit
Many people who own a medical practice fulfill some of their short-term financial requirements with a business credit card. A business line of credit is a better option than business credit cards. The interest rate on a credit card typically ranges between 10% and 27%, whereas the interest on a business line of credit is usually much lower, often as low as 5%. Additionally, business credit cards only provide access to a small amount of capital while a business line of credit can offer a significantly larger amount.
A business line of credit allows medical practices to hire a temporary replacement for a physician out on leave, replace or repair broken equipment or recover from a natural disaster. Since borrowers are only required to pay interest on the amount they utilize, it doesn’t prove to be too expensive for them.
How to Get a Business Lines of Credit
Business lines of credit are offered by most banks, as well as online financing companies such as Quick Loans Direct. The application process of a business line of credit for a medical practice can be slow when working with a bank, but alternative lenders can be much faster. As with any borrowed funds, you can expect your lender to require detailed financial reports to ensure the credit-worthiness of your practice. The financial institution will review these and determine your ability to repay the loan, and to establish a credit limit specific to your needs.
If a business line of credit is required to establish a new medical practice, the bank or financing company will review the business plan as well as expenses and revenue projections for the next year or two. They’ll also analyze the personal financial statement of the borrower.
For the most part, your medical practice won’t have to pay anything on a line of credit until you use the money. However, in some cases there may be a small annual fee associated with the line of credit.
Owners of medical practices shouldn’t hesitate to apply for this financing option. It can give you access to quick funds as you need them and help you eliminate disruptions that may be caused because of insufficient cash on hand.