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The Top 5 Things to Know When Getting a Medical Practice Loan

Cadence Bank Senior Vice President and Business Banking Executive Group Manager Karly Allison explains the most important to keep in mind when applying for a medical practice loan.

Doctors need to borrow money for a wide range of reasons. Expanding the facilities, meeting working capital needs, buying into a practice and purchasing new equipment are a few common reasons your medical practice might need to apply for a loan. 


It pays to be prepared when seeking financing for your medical practice. Cadence Bank Senior Vice President and Business Banking Executive Group Manager Karly Allison explains the top five things to keep in mind when applying for a medical practice loan:


1. All banks aren’t the same when it comes to medical practice lending


Medical practice financing is a unique type of business lending. “Practices need to make sure they’re working with a bank that really understands this type of lending and offers specialized types of practice financing,” says Allison.


She recommends asking other physicians for banker recommendations and then interviewing more than one bank before moving forward with a loan application. “Ask banks how their financing has added value to other medical practices they’ve worked with,” she suggests.


2. Providing thorough and accurate information to the bank is critical


If a bank asks for a certain piece of information or document as part of the loan application process, there’s a reason why. “Be thorough in preparing your loan application package,” says Allison, “and make sure you include everything the bank asks for.”


Among the documents a bank typically requests are:


  • Balance sheet and income statement
  • Current accounts receivable aging report
  • Tax returns for the practice and the owner covering the past three years

3. Expect detailed questions about your practice’s payer mix


Medical practice finances — in particular, accounts receivable — are different from most other types of business finances. “As bankers, we are looking closely at a practice’s net receivables, or what they’re going to collect after write-offs and contractual allowances,” says Allison.


Therefore, expect your banker to ask detailed questions about your practice’s payer mix of private pay, government programs and insurance reimbursement. “These are the primary sources of loan repayments, so we need to examine them carefully,” says Allison.


4. The bank will match the type of financing to the purpose of the loan


Allison explains that different types of loans are designed to meet different financing purposes. For example:



  • Lines of credit are used to help shore up working capital
  • Term loans are used for equipment purchases
  • Commercial real estate loans are used to purchase new buildings and real estate

“The collateral required to support the loan will also match the loan’s purpose,” says Allison. “So real estate may have to be pledged to support a commercial real estate loan and accounts receivable to support an operating line of credit.”


5. The lowest rate loan isn’t always the best loan


As with many other things, the cheapest loan option isn’t necessarily the best option. “I tell medical practices they should ask the bank if the proposed financing solution is structured in such a way that it will help meet their short- and long-term goals,” says Allison.


“Sure, the interest rate is important,” she adds. “But it’s far from the only thing practices should consider when shopping for a loan.”


Contact us to request more information about the business banking tools and solutions offered by Cadence Bank.



This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

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