A Guide to Physician’s Mortgage, Business, and Personal Loans
We live in a golden age of remote work. It's the first time where physicians have the opportunity to provide much needed care at a distance.
It's lead to a whole host of physician entrepreneurs and physician builders who are changing the landscape of healthcare forever.
If you're one of those healthcare providers, read on!
We wanted to put together a guide of possible loans you could take advantage of. When you take the dedication to go to medical school and then start residency, and then finally launch your career, your financials look a bit different than the average.
You become aware of your high debt-to-income ratio when you begin the process of applying for a loan. You haven't shown any evidence of a regular source of income, either.
After a while, you find a lender that offers physician loans that takes not just the traditional financial makers into account, but your future potential earnings that they can tap into.
If done correctly, it can be a win-win for everyone! Let's get our discussion started with physician mortgage loans.
Physician Mortgage Loan
A physician mortgage loan is a type of home-buying financing solution that has been designed exclusively for medical practitioners who want to purchase a home.
They are designed for those who have decent credit but are burdened by a large amount of student loan debt.
Physicians are desirable customers for a financial institution. Their historical performance shows that they are a solid risk for the bank to take, with earning potential that increases with time.
The bank gains an appealing client, one from whom they would earn interest as a result of assisting the doctor with a physician mortgage loan. They will view a physician as a customer with whom they might create wealth.
How Does A Physician's Mortgage Loan Work?
Physician mortgage loans can provide up to 100 percent financing without the need for private mortgage insurance (PMI), which is required by traditional loans when less than 20 percent down is put down.
This payment represents a significant fraction of your loan balance each year, so reducing it can save you a significant amount of money.
Physician loans also have large loan limitations, which can be as high as $1 million or even more, depending on the lending institution.
In other cases, the amount of funding you can get depends on how much you're financing — for example, 100 percent financing may be limited to $1 million, whereas 90 percent financing may be allowed up to $2 million.
There are other forms of physician loans available that can assist you in establishing your practice - these have a maximum loan amount of $5 million and can be used for a variety of purposes.
A larger debt-to-income ratio is also permitted by most physician loan lenders, who recognize that new doctors often have a significant educational debt to contend with.
Physician’s Business Loan/Medical Practice Loans
Physicians and specialists can benefit from a medical practice loan, which is a type of loan intended specifically for this purpose.
You can utilize this finance for a variety of purposes, depending on the loan package you choose, including operating expenditures, inventory or equipment purchases, the acquisition of an existing practice, and the establishment of a new practice, among others.
And the good news is that finding a suitable loan for these sorts of consumers shouldn't be too difficult.
SBA 7(a) Loans
As a general rule, SBA loans are among the best small business loans out there. These financing products are funded through intermediate lenders, with up to 85 percent of the loan amount guaranteed by the Small Business Administration of the United States.
The SBA 7(a) loan is the most popular of the SBA's lending products, accounting for over half of all SBA loans.
Because of its use-case flexibility and favorable conditions, the SBA 7(a) loan is frequently sought after by businesses.
These loans have some of the lowest interest rates and the longest payback durations available on the market. However, because SBA 7(a) loans are highly sought after, they are very competitive.
You'll need to demonstrate a solid borrowing history (i.e., a high credit score) as well as a stable financial situation, among other requirements. You can understand, though, why physicians are frequently considered strong prospects.
Traditional Bank Loans
For certain borrowers, a loan from a typical institutional lender is preferable (aka a bank). As an added bonus, if you're an eligible borrower, this might be a very attractive alternative; some banks even provide loan programs that are expressly designed for medical practice financing.
The United States Bank and Wells Fargo are two examples of banks that provide specialized loans to health care practitioners, including physicians, dentists, optometrists, and veterinarians, among other specialties.
They are better equipped to analyze the risk of borrowers who are in these specialized occupations since they are working directly with these borrowers.
They take into account characteristics that could have a negative impact on other borrowers, such as student loan debt (of which doctors frequently have a large amount), credit gaps due to health care workers' high earning potential, insurance, and track records of similar past borrowers, among other things.
Term Loans
When you think of a traditional business loan, it's probable that you envision a term loan as the solution. A lender lends you a large sum of money, which you must repay over time, including interest, over a certain period of time.
These medical practice term loans, like the bank loan products we covered before, are customized to meet the specific needs of doctors and specialists.
Rather than dealing with a typical bank, this approach would include borrowing money from an online alternative lender that caters solely to the needs of doctors and other medical professionals.
Short-Term Loans
Short-term loans are more expensive than SBA loans, bank loans, and non-bank term loans since they have higher interest rates and shorter payback durations than these other types of loans.
Although they are expensive, they may be worth it for health care providers who want quick funding. This is especially true if you have crunched the statistics and determined that your revenue will allow you to pay back this medical practice loan on time.
If you need money urgently, short-term loans may be a good option for you. This product may also be a suitable fit for you if you know you make a lot of money and would want to avoid incurring further debt in exchange for an interest rate that is lower than the market rate.
Business Lines of Credit
A business line of credit differs from the other types of medical practice loans that we've discussed so far in this article, such as term loans and installment loans.
Instead of acting as an extension of the loan, a business line of credit operates more like a company credit card.
A lender grants you approval for a line of credit for a specific amount of money. The difference is that in this case, you only pay interest on the cash that you really borrow.
Other notable advantages include the fact that, after you've obtained a company line of credit, you'll have access to the cash very immediately. So even if you don't use it for months at a time, it will still be there for you when you do.
Equipment Loans
Alternatively, if you want to fund for the express goal of upgrading or purchasing tools, machinery, or other equipment, you may choose to look into equipment financing.
However, because these medical practice loans are restricted to the purchase of certain things (you must submit a quote to a lender in order to be approved for financing), they may be quite beneficial if you have specific equipment requirements.
Obtaining equipment loans is a great option for significant equipment acquisitions, such as an MRI machine, a telemedicine setup, or other large purchases because the equipment itself serves as security for the loan itself.
In turn, this decreases the risk for the lender, which means that you are less likely to be required to make a down payment or to pledge any personal property as security.
If you're purchasing a high-value piece of equipment, as is frequently the case with medical equipment, this can also assist you in keeping the loan cost down as well.
Closing Thoughts
It can be scary out there trying to obtain financial lines of credit when you're a newly minted physician. But now more than ever, physician builders can access capital to take risks to form businesses that reflect the quality of care you hope to provide to your patients.
Keep checking WhiteCoatRemote for new guide's for upcoming physicians, we hope you found this one useful!