When it comes to borrowing money, doctors have it easy. This is true when they’re trying to get a home mortgage loan, or if they use the money for their medical practice.
But the problem is that doctors aren’t really business-minded for the most part. That means they don’t often know how to choose the best banks that offer the right finance tools with the most suitable terms. This is understandable, but that doesn’t make it right.
So if you’re a doctor, here are a couple of basic rules to remember:
If there’s one rule that doctors need to know about, it’s this: don’t just go to your personal bank or the nearest bank and apply for a loan. You have to talk to more banks. You have to shop around and interview banks. This may be a strange idea for you, but you have to accept the necessity of it.
It’s a bit like interviewing a partner for your medical practice, and in a sense this is actually an accurate description. The bank will really want to be your partner. They want you to borrow from them for your medical practice, they want you to use their bank to finance your company and for your personal needs, and they want you to get a mortgage from them. And when other doctors ask you for bank recommendations, they of course want you to mention their company.
So how do you choose a bank? First, of course you should try to see which ones offer the best terms. But you should also make sure that they have ample experience in lending money to doctors so that they’re already familiar with your industry.
And if you want to take out a loan that’s SBA-guaranteed, the bank should also be familiar in dealing with the complications brought by SBA lending.
Choose the Right Type of Loans for Doctors
Too many doctors seem to think that a line of credit—or a credit card—is the right type of finance tool for just about anything. But that’s not exactly true.
For example, a line of credit may not be the best tool when you’re paying for medical equipment. Perhaps you can pay for the equipment through an installment agreement. You may even ask if it’s possible to just lease the equipment.
The rule of thumb for medical practices is that a short term loan should be used for a short term need. Conversely, a long term loan that lasts for more than a year is better for your long term needs.
If you use a line of credit or a credit card for your business, you need to pay it off right away or else you will be slapped with finance charges and high interest rates. It’s a better idea to get a term loan that extends past the expected useful life of the equipment you want to get.
Borrowing money for your medical practice can really help you out. But if you don’t even try to educate yourself financially, then you may not get the maximum benefits from your loan. The loan may even hurt your medical practice.