It's no secret that doctors and other medical professionals often come out of school with massive debt. Trying to finance a medical practice or other business while dealing with medical school debt might seem impossible, but several financing options exist for practitioners with debt. Additionally, practitioners might qualify for medical school debt forgiveness, making finding medical practice financing easier.
This article will explore the different ways of dealing with medical school debt, including seeking out doctor loan forgiveness programs and the various types of medical practice loans. There are many common uses for medical practice financing, including buying expensive medical equipment and acquiring additional practices. Of course, medical professionals must first find the funds to start and run a practice, all while dealing with medical school debt. Below we will discuss the following topics:
- Dealing with medical school debt.
- How to pay off med school debt.
- Finding loan forgiveness programs for doctors.
- Various types of medical practice loans.
- Examples of common uses of medical practice financing.
Dealing With Medical School Debt
If you thought undergrad student debt was a lot, you might be shocked to learn how much debt doctors have after medical school. The Association of American Medical Colleges estimates the average medical school debt to be around $201,490. Granted, many doctors make around that much in their average salary after med school, but it still takes an average of 13 years to pay off these loans.
When determining the cost to repay medical school debt, it's crucial to consider three factors: interest rates on the loans, what is done during residency, and how long it takes to pay them back. Because many medical school grads have to work in residency for three to seven years, they may only be able to make partial monthly payments on their loans during this time. Some might not even make any payments at all. Unfortunately, interest can pile up during this time, and unpaid interest may be "capitalized," meaning it's added to your loan balance.
How To Pay Off Medical School Debt
Because medical school debt is typically so massive, several strategies for paying it off can help doctors or physicians get back on their feet financially after med school. One significant opportunity that should be taken advantage of is loan forgiveness, though not all medical grads will qualify for this. In that case, repayment plans can help with long-term strategies for tackling loans and refinancing, which is another option to qualify for lower rates.
Loan Forgiveness
We will go into loan forgiveness in more detail below, as it's an excellent option for paying off medical school debt. Loan forgiveness is typically a long-term solution and can help those who plan to work for the government or a qualified nonprofit.
Residency Options
Most medical professionals have to spend time in a residency before they can start practicing. What you do with your loans during this time is crucial to paying them off. Suppose you aren't earning enough as a resident to make loan payments. In that case, it's a great idea to explore one of these options: mandatory forbearance, income-driven payment or graduated repayment.
Repayment Plans
After residency, it's wise to consider a new repayment strategy that will make sense for you in the long run. With a salary boost, you can make more significant payments on your loans, meaning you can pay them off much faster.
Consider Refinancing
Federal student loan interest rates are often one-size-fits-all. If you have good credit and high earnings, you might qualify for better rates from a private lender. Consider your current repayment terms and shop around to see if there is a better deal elsewhere.
Medical School Debt Forgiveness
As mentioned, doctor loan forgiveness programs can help pay off student loans quicker. You might be wondering, how do you get medical school debt forgiven? Well, there are quite a few ways to do it, and it will depend on your specific case. To find out if you're eligible, you'll need to know what types of loans qualify. Research programs and find out if your student loans are federal or private.
Sometimes, you might also need to check where you have to work. Loan forgiveness programs for doctors often require that you work in the public sector, an underserved area, or a health professional shortage area for several years. If you are hoping to qualify for loan forgiveness, you may want to research this and find out what sorts of jobs (and time commitments) would make you eligible.
Types of Medical Practice Loans
So, how do you finance a medical practice purchase once med school is out of the way? Like paying off student loan debt, there's no one-size-fits-all solution. Doctors or physicians can use a wide variety of financing options to fund their medical practice. Whether you need the money to buy a new practice or you'd like to invest in an expensive piece of medical equipment, there's sure to be a business financing option for medical practitioners that will fit your needs.
Why Medical Practices Need Money Fast
Some financing options are faster than others, so which practice loan you choose will depend on your timeline and the use of the funding. There are a few reasons why medical practices might need fast financing, including:
- Avoiding payroll stress so that employees are paid on time.
- Emergencies such as medical equipment breakdowns, collection issues, facility repairs, or sudden loss in sales due to an economic event.
- Acquiring new software or technology that has necessary upgrades.
- Making up for accounts receivable issues with insurance.
- Repairing or replacing medical equipment essential for the function of your primary care clinic.
If you find yourself in a pinch to get medical practice financing, for these or other reasons, there are practice loans that can help you quickly find the funding you need. Consider applying for a medical practice long-term fast-track business loan or even a short-term one. Other financing options to consider include business lines of credit, equipment loans, merchant cash advances, or even a business credit card.
Options for Medical Practice Loans and Financing
Whether you're in a pinch or not, there are many medical practice financing options that you can consider. Medical practice loans can be short or long-term, depending on your needs and project scope. If it's just a new piece of medical equipment you're after, equipment financing will be the perfect solution for buying or leasing medical equipment. Physicians will be happy to find out that there are many financing options, including business loans and lines of credit. All you have to do is determine which is best for your new practice and go from there.
Long-Term Medical Practice Financing
Any small business loan with a duration greater than two years is considered long-term. This is the best financing option if your medical practice is working on a long-term project or need because it's typically reserved for business expansion or growth. Your medical practice will be offered a fixed amount upfront and charged principal and interest on the long-term business loan. The terms are typically 2-10 years with monthly or bi-weekly payments.
Short-Term Business Loans
If your medical practice is looking for something more short-term, a short-term business loan could be the right move. If your medical practice doesn't qualify for traditional funding, short-term business loans are available but tend to cost more. Medical practice loans of this kind usually have to be repaid within 6 to 18 months, and the payments are more frequent because of the greater risk lenders take.
Equipment Financing
One sure way to find financing for your medical practice is by using equipment financing. Every medical practice needs the right tools and equipment to operate, and often these pieces are expensive or need to be replaced with the latest version when it becomes available. For this reason, equipment financing has become a popular way for medical facilities to maintain and update their medical equipment at a reasonable cost.
Equipment leasing is not considered a loan but allows medical companies to rent equipment from a retailer, distributor, manufacturer, or leasing company. Once the lease is over, the equipment can be bought, renewed, or returned. Leasing equipment usually costs more than a loan in the long run, but it can equate to lower monthly payments and a potential low-cost buyout of the equipment at the end of the lease.
Invoice Factoring
Another financing option that practitioners can use is invoice factoring. This funding method advances the outstanding balance of an invoice to business owners to increase cash flow. Invoice factoring is perfect for medical practices because there are often unpaid invoices from patients or insurance companies. With invoice factoring, you won't have to wait to get paid to receive the cash you need.
Business Line of Credit
If you need funds on-demand or to make purchases, a business line of credit is an excellent financing option. It is an open revolving line that charges a principal and interest rate with a credit limit that cannot be exceeded without approval. Business lines of credit have to be renewed to be extended. If your medical practice needs to make small purchases, this funding option is great.
Common Uses of Medical Practice Financing
Whether you are opening a new medical practice or need funding for medical equipment, finding financing is essential to your success. There are a handful of common reasons medical practices seek funding - including the above causes and more. Listed below are some other uses of medical practice financing.
Working Capital
Medical practices rely on payments from insurance companies for their services, but these payments are often delayed. With financing in place, your practice won't have to worry about always getting paid on time. Any delays in reimbursement won't slow you down with working capital in place.
Medical Equipment Financing
As mentioned, medical equipment financing is one of the top reasons why practices need funding. With equipment financing, medical facilities can free up their budget and continue to grow, all with the right equipment.
Practice Expansion or Remodel
Expanding or renovating a practice is an expensive but necessary for some medical facilities. Whether your practice needs a significant update or you have to relocate, funding a construction project is no easy task. This is where alternative loans and funding come in. With so many options, you can find the right financing option to help you complete your project on time and on budget.
Debt Restructuring
If you have built up debt with your medical practice, restructuring that debt could help your bottom line. There are options to restructure debt in the form of a long-term loan to make lower monthly payments.
Investment in Diversifying Medical Services
Medical treatments and technology are constantly evolving. In order to keep up, your practice might need to make some expensive updates to your software or technology. Growing your practice means offering the latest and greatest options for your patients, which will mean a need for new financing options to make it work.
Acquire Additional Practices
If you want to grow your medical practice, you must know what financing options exist. You will need the proper funding to acquire a practice or close a deal to merge companies. Medical practices can benefit from loans to make this happen.
Financing Options for Practitioners with Massive Debt
Finding alternative forms of funding is essential for practitioners coming out of medical school with massive debt. Thankfully, there are several helpful options for dealing with this large amount of debt, like loan forgiveness and refinancing. Medical practitioners also have plenty of ways to find funding for their practice, whether acquiring a new one or needing the necessary equipment to operate. With so many great alternative financing options, doctors don't have to worry about getting the funding they need to run their practice.
