Medical professionals, do you need a loan for medical equipment? There are financing programs out there for all healthcare providers, even if you have bad credit.
Did you know that it doesn’t have to come from a bank or a credit union?
Let’s dive into the best durable medical equipment financing option for you.
What Is a Medical Equipment Loan?
Unlike many other industries, doctors are often pressed to keep up with new procedures and techniques. But those same physicians may not have the working capital to afford to continually have state-of-the-art medical equipment.
Even a local free clinic will want to have the best healthcare equipment.
For physicians without enough cash flow to afford new medical equipment today, a medical equipment loan can be very appealing.
Medical equipment finance provides financing for medical professionals, such as GPs, surgeons, dentists, and specialists, when they can’t buy equipment for their practice immediately.
But healthcare equipment financing does not have to come from a bank, and it does not have to be a term loan. There is even government-backed medical equipment financing out there.
With medical equipment financing, a medical equipment loan company or lender gives you money to acquire equipment. You then pay back the loan plus interest. Sometimes, this is in regular installments.
Your credit score may be a factor in being able to get equipment financing. Interest rates will vary.
Types of Medical Equipment Loans
Loan Type 1 – Unsecured Lending from National Funding
National Funding offers unsecured business loans. You will need to have at least 6 months in business. And you will need to have fair to excellent credit to be approved.
Get funding in as little as 24 hours. You can get an early payment discount for these types of business loans.
For equipment financing, your payments are remitted monthly with terms of two to five years. With a working capital loan, your payments can be remitted daily or weekly with terms of four months up to 24 months.
Also, you may be able to get a Section 179 Tax Deduction. This allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year.
Loan Type 2 – Medical Equipment Leasing from Midland States Bank
Midland offers equipment leasing options for physicians. Get the latest equipment and have the flexibility to upgrade or make a change when your needs change or the technology improves.
Medical equipment leasing can be a great way to keep your practice or hospital up to date with a lower initial cost. You can even get 100% financing through Midland.
If you are financing $300,000 or less, they can approve your financing with just an application. You can use their one-page application for transactions of up to $500,000. They can offer fast business loans with a turnaround time of as little as 24 hours.
Loan Type 3 – SBA Lending
The Small Business Administration offers more than one small business loan which can be used for medical equipment funding. You can use a 504 loan to get long-term machinery and equipment. Or use these SBA loans for fixed assets, or to improve an existing building.
For example, you can use this type of financing to expand a waiting room or convert existing space into, say, an x-ray room.
With a 7a loan, you can use it for more than just buying equipment. You can also use one to buy furniture or land or to construct a new building.
With both kinds of loans from the SBA, you can get up to $5 million.
Loan Type 4 – Equipment Financing from Fast Capital 360
Fast Capital 360 offers several types of loans. Their equipment financing comes with an interest rate starting at 8%.
Get funding for up to 100% of the equipment’s value. This depends on the condition of the equipment and how well you can meet their qualifications.
To qualify, you need to be in business for at least two years, and you must be bringing in revenue of at least $160,000 per year. Your personal credit will have to be 620 or better.
Get terms of one to five years, so this is not a short-term loan. Get funds for this professional loan in as little as two days.
Loan Type 5 – Help Your Patients Borrow Medical Equipment via a Medical Loan Closet
An organization such as South Metro Medical offers wheelchairs, crutches, walkers, canes, hospital beds, knee cruisers, extended grabbers, toilet seat risers & stabilizers, shower chairs, chairs to move into/out of a bathtub, and other items.
For this type of equipment, it can make sense to pass the borrowing on to your patients.
Also, these sorts of organizations will take a donation. With a 501c(3) organization, you can donate and get credit for a tax deduction.
Maryland has a similar type of program.
Loan Type 6 – Business Line of Credit
A business line of credit will work a lot like a business credit card.
A lender approves you for a line of credit for a set amount. But you only pay interest on any funds that you actually borrow. Another big benefit is that once you’ve established a business line of credit, capital is quickly accessible.
So even if you don’t use it for months, it’s still there when you do need it.
Even more importantly, unlike with a personal loan, gold loan, or education loan, your payments are likely to be reported to the business credit bureaus.
What Type of Equipment Can I Finance?
Use medical equipment financing to buy everything from diagnostic equipment to x-rays and other imaging equipment.
Dentists can use a medical equipment loan for dental instruments. Optometrists and chiropractors can use one to cover their equipment. And dermatologists and gynecologists can use one as equipment financing for their own needs.
Hospitals and larger practice groups can use one to purchase diagnostic equipment. And hospitals can also use such a loan for beds and examination tables.
In short, almost any type of medical device can be purchased using equipment financing.
For used equipment financing, it can be a bit trickier. But this is because a piece of equipment’s type, age, and condition will dictate the down payment, interest rate, and repayment terms. But that is true for equipment financing in other industries as well.
Because the useful life of most medical equipment hovers at around seven to ten years, a lender will understandably be cautious if you are looking to finance an eight-year-old piece of equipment.
As a result, a down payment for used equipment could be higher. Also, the payment term could end up being shorter. Therefore, you can expect that the monthly payment would be higher than for buying new equipment.
Usual Medical Equipment Loan Requirements
Requirement 1 – Decent Personal Credit
For many of these types of financing, you will likely need to have a FICO score in at least the low 600s to be considered at all.
You may be able to get around this if you are trying for shorter-term loans.
While it may still be possible to get medical equipment loans with bad credit, your interest rate might exceed 10% or even run more than 20%.
As is the case with other industries, physicians with poor personal credit scores should work to raise their credit scores. Paying credit bills on time and watching usage can save you percentage points on many forms of physician lending.
Requirement 2 – Some Time in Business
With many forms of physician business financing, you will need to have at least two years in business before you will get approval.
This is because very new companies—even medical practices—are seen as risky by lenders. Startups may be excluded from many kinds of financing. What you pay in interest will undoubtedly be high if you get financing.
You may want to consider merchant cash advances, as you will only need to be in business for four months to qualify. But keep in mind: the cost of interest for MCAs is high, and the payback terms are short.
Requirement 3 – Be Bringing in an Acceptable Amount of Revenue
For all lenders (and not just in the physician financing space), a business with low revenue is going to look risky.
You will most likely need to be bringing in at least six figures per year to qualify for any form of funding. Even for an MCA, you will have to be able to meet that threshold.
Physicians with startup practices will likely need to compensate in some other way to assuage a lender’s concerns. Having a good FICO score or being able to put up valuable collateral, can help. Being able to secure a loan with a fixed deposit may also work.
Requirement 4 – Documentation and Possibly a Down Payment
When applying for medical equipment financing, you will most likely need to provide:
- Driver’s license
- Voided check
- Bank statements from the past three months
- Invoice for the medical equipment
- Financial statements
Also, depending on the loan amount and the lender, you might need to provide additional documentation.
The SBA in particular will require a great deal of documentation. But this is the case for any industry looking to get loans from them.
Many loan providers—including the SBA—will want you to provide a substantial down payment. But this is not the case for leasing equipment.
And with a lease, you can also take your lease payments as a tax deduction.
Physicians have an array of financing options when it comes to getting the latest equipment for their patients. Qualifying is not a given. Some choices may be more advantageous, tax-wise.
Contact Credit Suite today. Our expertise can help you cut through all these choices with the precision of a surgeon.